Car rental companies desperately want you to buy their insurance and will go
to great lengths and trouble to make you pay for even the smallest of damages if you don’t.
But should you buy their insurance and are the alternative forms of car rental insurance worth it?
That is the topic of today’s video, if you are new here my name is Ben.
I am the owner of Ben Thoennes Dream Vacations Travel agency and on this channel I
provide weekly travel information and tips to help you
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So lets talk about the insurance the rental companies offer first.
If you were to buy their collision damage waiver, or CDW for short.
Or you may even see it being be called an LDW for loss damage waiver, but in either case if you were to buy the CDW from the rental car companies.
The rental car companies surrender their rights to charge you for damage to their cars (with a few exceptions like gross negligence).
But otherwise, no matter how bagged up the car is when you return it, you are off the hook.
Just return the car and be on your way.
And no other approach, whether that be your own insurance, your credit card, or a third-party policy (which I will cover here shortly)
but no other approach is as comprehensive or convenient.
The problem with buying a CDW from a rental car company is that it is ridiculously overpriced.
A CDW can start at around $30 per day and go higher and even cost more than the daily rental car rate.
That is why when you are renting a car, the agents there push hard for you to purchase their insurance because its clearly more profitable than the rental car alone.
Now you can cover your major damage responsibility by relying on your own insurance, a credit card with insurance, or a third-party policy.
But in all those cases you have to pay a damage claim up front, then hope to recover as much as you can (all of it, you hope) by filing a claim afterward.
That might mean signing a credit card bill for hundreds or even thousands of dollars when you return a damaged car, not knowing if you will get all that money back.
This is also why many rental car companies won’t accept debit cards or a credit card with a small limit.
And remember earlier when I said if you buy the CDW from the car rental company you are essentially off the hook for any damage?
Well, If you don’t buy the CDW, car rental companies can charge for more than fixing the damage.
They can also charge for: 1. “Loss of use”, meaning the potential revenue lost while the car is out of service being fixed, even if the company had lots of other cars available.
And they generally figure that daily loss at the full retail rate.
2. Towing charges, if you are unable to drive the car back to the station.
3. “Diminished value”, or the potential loss of the car’s resale value (because of your damage) when the rental company disposes of it, usually within two years.
4. Administrative fees associated with the claims process.
Most non-CDW car rental insurance will cover these extras. But in some cases, coverage depends on cooperation from the rental company.
So lets now talk about the alternatives to getting the CDW from the car rental companies.
The first alternative is using your existing car insurance.
If your auto insurance covers collision damage, it in most cases will cover damage to a short-term rental.
However, this coverage is limited to driving in the US and maybe Canada, and won’t cover car rentals in any other countries.
So, before you use your your own insurance, check its coverage. If it does cover rentals, you can place a claim on it.
Still, you must typically pay your policy’s deductible, and any claims may cause your rates to go up.
And moving on to the second alternative is using credit card benefits.
These days, most credit cards offer “free” collision coverage for car rentals, provided you use their credit card to pay for the rental.
You might get a credit card with a description of coverage such as this one.
Note that this card’s benefits do not cover diminished value or administrative costs.
There are a few premium cards that actually offer primary collision insurance, meaning
they take on the full responsibility for the payment. But coverage on most cards is secondary
coverage, meaning the card picks up only what you can’t cover from your own insurance.
And you still have to pay the rental company up front, then file for reimbursement from
your card issuer. Another gottcha in the fine print of this particular card is that this
card pays for loss of use only if verified by the rental company’s log. Unfortunately,
some rental companies don’t cooperate with credit card issues in providing this type
of documentation in a timely manner. And lastly the third alternative is a third-party
rental car insurance: If you rent a car through one of the big online travel agencies such
as Expedia or Priceline, they will offer you an option to buy collision coverage
for around $10 a day. That coverage is provided by a third-party insurance company like Allianz.
The cost is a lot less than the rental company’s CDW but as with credit card coverage, if you
damage the car you have to pay all the costs up front and claim later.
And one last insurance item I should mention is liability protection but don’t buy this
from the car rental company. Liability insurance comes with either a homeowner or renter’s
insurance and it covers far more than a rental car. If you are renting a car in another country
most countries by law are required to include liability insurance. However in the US, required
coverage can be ridiculously small because they typically offer only the set state minimum
required. If you don’t have substantial liability coverage, you might consider buying
the rental company’s offering. Still, your best bet is to make sure you are covered 24/7
with your own insurance so you don’t have to pay for the rental company’s overpriced
insurance. So the take away from all this is that if
you have been using your own insurance, your credit card, or a third party as an alternative
source for collision damage coverage then it is still probably a good option for you
to continue to use. As long as you are willing to
pay all the costs upfront and even going through the process of filing a claim if you were to damage a rental car.
However, if you are unwilling to take any risk at all, and just want the convenience of being able to just drop off your rental car and going, even if it is damaged.
Then getting that overpriced CDW from the rental car company is probably the better fit.
Well, that will do it for this video.
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Thank you so much for watching and I hope to see you in a future video!