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Renting a car is often a great way to get around on vacations, business trips, and more.

But as you approach the rental counter, you may be bombarded with persuasive sales pitches for insurance coverage. The rental company wants to protect its fleet and minimize potential risks, so it’s no wonder they emphasize the importance of insurance. But keep in mind that their primary goal is to make a profit. So, while they may insist on insurance, it’s essential to consider whether their recommendations align with your specific needs.

In this blog post, we’ll cover the basics of rental car insurance and help you decide if you need to add insurance coverage the next time you rent a car.

Does My Car Insurance Cover Rental Cars?

The most common question people have regarding rental car insurance is whether or not you can rely on your existing personal auto insurance when renting a car. There are 2 major coverages that you need to be concerned with, liability coverage and physical damage coverage.

Liability coverage protects you in case you cause damage to someone else’s property or injure others in an accident. Almost all personal auto policies provide liability coverage for rented cars. There are a few exceptions that we’ll get into below, but generally speaking, you can rely on your existing auto insurance to cover this exposure.

Physical damage coverage covers the rental vehicle itself if it gets damaged or stolen. If you have at least one vehicle on your personal auto policy that has comprehensive and collision coverage (often referred to as “full coverage”), then your auto insurance will cover physical damage claims for your rental car.

By leveraging your existing policies, you can save on these additional insurance costs.

When Should I Purchase Rental Car Insurance from the Rental Car Company?

If you meet the previous requirements, you do not need to purchase additional coverage.

If you don’t have personal auto insurance or your policy doesn’t cover rental cars, purchasing insurance from the rental car company (or a third party) is necessary. Rental car companies will typically offer various coverage options, and while it may add to the overall cost of renting a car, it can provide peace of mind and financial protection in case of an accident or damage. Liability and Physical Damage coverage are the two they will offer you, and the most important to obtain.

Potential Roadblocks

Although these are rare occurrences it’s important to take note of the two potential issues that may arise in the case of an accident in a rental car, Loss of Use and Diminution of Value claims.

Loss of Use is a term used in the context of rental cars and refers to the potential financial loss incurred by the rental car company when a vehicle is out of service and cannot be rented due to damage, repairs, or other reasons. It represents the revenue the company would have earned if the car had been available for rent during that time.

Diminution of Value refers to the reduction in the market value or resale value of a rental car following an accident or damage, even after the vehicle has been fully repaired. It is a concept commonly associated with rental car insurance.

When a rental car is involved in an accident, it may undergo repairs to restore it to its pre-accident condition. However, despite the repairs, the vehicle’s value may be permanently diminished due to its history of damage. This decrease in value can result from various factors, such as the perception of potential buyers that the car is less desirable or reliable after being in an accident, concerns about hidden or residual damage, or the existence of a negative vehicle history report.

When deciding whether or not you need insurance when renting a car, it’s important to consider your existing policies and budget. The rental company’s insurance may provide adequate coverage, but if you’re worried about being responsible for any damages, it may be worth it to purchase additional coverage. Ultimately, the decision is yours, and with the right research and preparation, you can be sure you are adequately protected during your car rental experience.

To ensure you have a clear understanding of your coverage, it’s recommended to contact your insurance provider directly and inquire about the specific terms and conditions related to rental car coverage. They can provide you with the most accurate information based on your policy.

Safe Travels!

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