If you asked a panel of CPCU-certified insurance experts this question, you would likely be met with the age-old insurance answer of “it depends.” More of what is at consideration here is the rental company’s offer of a damage waiver (DW) or collision damage waiver (CDW). Damage waiver is not insurance per say, but more the rental company’s offer to waive its right to collect for damages to its rental vehicle while it is under your care. From an insurance expert’s standpoint, anytime a waiver is available, it could be considered more desirable than one’s personal insurance because a waiver is all encompassing, that is, it is free of exclusions or general policy restrictions. In addition, damage waivers typically come free of any deductible.
Rental car companies offer a wide variety of products and services; however, for purposes of this article, the only “insurance” we will concern ourselves with will be the damage waiver. Before you decide for yourself whether or not the rental car damage waiver is right for you, you should thoroughly consider the following:
• Do you currently have auto insurance, and does it transfer over to a rental car?
In most states and with most insurance companies, the vast majority of insurance policies transfer over to a rental car. That being said, the auto policy and coverage you have is the exact coverage you will have for the rental car.
- Is it liability only coverage? If yes, then you have no physical damage coverage for your rental car.
- What are my comprehensive and collision deductibles? The average policyholder has deductibles of $500 for either coverage. Can you afford to incur that sort of financial burden in the event of a rental car loss?
• Can you afford a claim on your policy?
If you choose to use your own insurance, you would be filing a claim with your insurance in the event of a loss. Being unfamiliar with your surroundings and the function of the rental car may increase the likelihood of an accident.
• How many drivers will there be for the rental car?
More drivers equates to more general risk of a loss to the rental car. More drivers also increases the difficulty of fully knowing the insurance coverage being afforded to the rental car. Also, most rental car damage waivers cover all permitted drivers for one daily fee.
• Do you have a damage waiver through your credit card?
If yes, depending on your situation, this may be an appropriate alternative to purchasing the rental company’s damage waiver.
- As with any such service, however, be sure to always check with your credit card provider for any possible exclusions or fine print. Common examples include:
* Damage waiver is void if any discount is received on rental.
* Damage waiver is void if entire rental is not purchased solely using this credit card.
* Damage waiver may not apply to vehicles larger than a 4-door sedan.
* Damage waiver may not apply to B-plated vehicles.
* Damage waiver may have a built-in deductible.
• What are the rules of the road for the states you will be traveling through?
- Depending on the state you are in, you may hear your rental car agent use the term "No-Fault" state. The common misconception is that this concept applies to physical property damage. The truth, however, is that this terminology only applies to bodily injury or medical-related claims. Being in a "No-Fault" state is not a reason to purchase a rental company's damage waiver.
- Does the state you are renting from allow the rental car company to collect for loss of use or diminution of value? If your personal auto insurance does not cover this and the state you are in allows a rental car company to collect for either of these, then the damage waiver becomes essential.
* While few insurance companies cover either of these type of losses, Pekin Insurance covers both with either its Auto Guard Endorsement (1608) or with its Comprehensive Increased Transportation Expense Endorsement (4022).
A good rental car agent will sell the damage waiver as nothing more than optional “peace of mind.” As we all know, our own auto insurance is there to protect us in the event of a loss. Although most of us will rent a car without any incidents at all, it is up to us to be educated on our own personal auto protection and the options from the rental company to make the best decision.
Personal Lines Underwriter