Protection comes in many forms

The conundrum for many consumers renting cars is whether to buy supplemental insurance. Upon pickup, an attendant will likely ask whether you’d like to purchase some form of liability coverage for an extra cost per day. The price effectively goes from $150 to $300 in a matter of seconds. In the back of your mind you know it’s the right thing to do. But you could be spending double for one simple reason: You don’t know that you’re already covered.

We always advocate for the best and most comprehensive form of insurance money can buy. That said protection comes in many different forms. It doesn’t always depend on what companies like Avis or Enterprise try to offer (or more accurately, sell). Below we include three different forms of protection (including rental protection) and how they work. This isn’t to suggest you should save as much money as possible. Instead, we hope to educate readers about what types of coverage exist and why you should take time to understand them.

Your auto insurance policy

Many insurance companies factor rental coverage into their contracts, which can be a nice incentive for those who travel on a regular basis. But it depends on the type of package you choose to buy. The caveat: knowing what and whom your policy covers under different circumstances.

Three primary forms of coverage provided by your insurance company: liability coverage, comprehensive coverage, and collision coverage. Each protects you in different ways, but favoring one more than another puts you at greater risk. That’s because the extent of your coverage depends on the nature of the crash. For example, liability coverage covers another person’s medical bills and property damage if you happen to be responsible for the accident. By contrast, collision coverage is designed to take care of your own bills and damage.

What to do: Discuss your insurance coverage with a representative over the phone or in-person. Have your rep outline what your contract stipulates and how you’re covered under the guidelines of the agreement.

Your credit card policy

Most credit card companies offer some form of consumer protection, including minimum liability coverage for rental agreements. We’re not suggesting that simply owning a credit card guarantees you complete coverage. In fact, coverage often depends on the credit card company and the policies they choose to enforce. An American Express Gold Member may have better coverage than a standard Discover Card as it pertains to annual fees, etc. The big thing to know in this case is that credit card liability coverage is minimal compared to your personal auto insurance policy and what rental companies offer.

What to do: Contact your credit card company by calling the number listed on the back. A representative can provide a written document outlining terms and conditions in greater detail.

Rental insurance

Rental companies typically offer at least four forms of insurance coverage: Liability, Collision, Personal Effects, and Personal Accident. As we lay out above, liability and collision take care of different aspects of a crash if you happen to be responsible. But rental insurance differs from standard coverage in the sense that rental coverage is designed to protect their property, less so the driver.

What to do: Do a little advance research online and understand the definitions of what the rental provider offers. Rental carriers are less concerned with explaining the nuances of their protection packages as they are with selling them. Ultimately, the idea is to get you to buy; you shouldn’t expect them to cover everything in concise detail.

Founders Ins. Co. v. Walker, 2015 IL App (1st) 141301

Car Rental Insurance: Waiving coverage could leave you waving goodbye to your bank account.

Insurance companies are pushing the “pick-your-own-plan” or “you-pick-the-price, we-pick-the-coverage” idea to consumers as a smart and simple way to lower insurance costs. They reduce their premium in exchange for dropping certain coverages. Alternatively, comprehensive plans provide much wider coverage by charging a higher premium. The discounted non-comprehensive plans are certainly viable options to consider to cut rising insurance premiums for some, but in the case of Sybil Morrison, it ended up leaving her without coverage.

Sybil rented a car from Enterprise and, like many of us often do, waived the insurance offered by Enterprise. Sybil had a non-comprehensive insurance plan with Founders. She bought, among other things, liability insurance that covered bodily injury and property damage, but contained an exclusion provision for rentals. She did not purchase the physical damage coverage, which would have included collision coverage.

On May 6, 2012, the car Sybil rented was damaged in a hit-and-run accident. She made a claim with Founders, which was denied because Sybil’s plan did not include collision insurance. Sybil and Enterprise argued that the claim should be covered under the liability coverage. Founders disagreed, reasoning that liability coverage protects the insured against injury and loss to others whereas collision insurance protects loss or injury to the insured’s own vehicles. Because Sybil did not purchase collision insurance she was not entitled to coverage. Additionally, even if Sybil’s claim falls under liability coverage, the section contains a rental property exclusion provision.

The Court held that Sybil’s claim should have been covered under the liability coverage, but that the exclusion provision precluded insurance coverage for damages to rental cars. The Court explained that liability coverage typically includes damage to other’s property and not damage to the insured’s own car. In other words, liability coverage should cover the insured in instances when she can be sued for damages (i.e. held liable). One cannot sue themselves for damages, so typical liability coverage does not apply to damages to one’s own car.

This instance being atypical in that the damaged car was not the insured’s own car but belonged to Enterprise. Enterprise could, and in-fact did, sue Sybil for damages to that car. Sybil could be held liable for damages and therefore this claim should have been covered by the liability insurance. However, the exclusion provision still applied and coverage was properly denied.

The Court, additionally, pointed out that exclusion provisions’ purpose is to allow for lower insurance premiums in exchange for minimal liability coverage. They continued that Sybil could have avoided this loss simply by either purchasing a more comprehensive insurance plan from Founders or purchasing insurance from Enterprise.

Before waiving rental car insurance, make sure you have coverage. Otherwise, you could end up with the repair bill for the car.

Click here to read the full case note

Do I need rental car insurance?

Protection comes in many forms

Your auto insurance policy

Your credit card policy

Rental insurance

Think twice before waiving rental insurance