It seems simple enough. Your car insurance policy provides coverage when you drive a rented car, and your credit card company brochure touts rental car damage benefits as well. With multiple sources of coverage, you figure you are already protected against financial losses if you crash your rental. Unfortunately, this might not be the case. Before you say “no” to the collision damage waiver, consider what could happen after an accident.
The car is repaired, and the charges are billed to your credit card.
Rental car companies make money when their vehicles are on the roads – not when they are sitting idle waiting to be repaired. If you return a damaged vehicle to your rental company and do not have a collision damage waiver, do not be surprised when the rental company bills you for the repairs. If you have a credit card on file, the rental company could charge it for the damages even if you have an alternative coverage source, such as your personal auto insurance.
There are a few problems that could arise from this type of scenario. First, your insurance company may need to assess the damage before covering the repairs. If the rental company has the vehicle repaired before your insurer has a chance to look at the car, your claim might get denied. Also, the charges billed to your credit card – even if temporary – can max out your credit line, costing you interest and potentially affecting your credit score.
You have to file a claim against your personal insurance
You pay for personal auto insurance so that you are covered if you ever need to file a claim. If that coverage transfers to your rental car, why spend extra money for the collision damage waiver? There are three reasons: your deductible, your claims history, and the loss valuation.
If you have a $500 deductible for your collision and comprehensive coverage, that is how much you might have to pay out of pocket to reimburse the rental company for vehicle damages. If you are using a personal umbrella insurance policy instead, expect to owe a self-insured retention of as much as $1,000 or more.
Car insurance companies take note when you file a claim. Not only can it affect your ability to find quality coverage in the future, but it can also cause the rates on your personal coverage to increase. Not to mention, if you already have a couple of accident claims on your record and then add another one, your insurer might refuse to renew your coverage once it expires.
If you’ve ever read the details in your rental agreement, you know that the rental company gets to decide the value of the vehicle you borrow. That means you can be charged the cost of a brand new replacement even if you are driving a car that has significantly depreciated due to high mileage. Unfortunately, this often leads to a dispute between insurance companies and rental car companies. If your insurer is only willing to pay damages based on the actual market value, you could get stuck with a big bill for the rest of the rental company’s losses. Not to mention, you might also get charged for other expenses not covered by your insurer, such as towing fees or the rental company’s loss of income.
If this article left you with more questions than answers, feel free to contact the folks at Pagel & Associates. We’d be happy to answer any questions you might have.