|Telephone (423) 538-5165 or 1-866-700-4218|
Many people wonder if they should purchase the insurance offered by rental car companies which can range from $15-$25 per day in some cases. The short answer is, "Yes". I encourage our clients to purchase the car insurance from the rental company when renting an automobile. The biggest reason I recommend this is because most personal auto policies do not cover Loss of Use or Diminution of Value to a rental car. As an example, let's assume you rent a car and don't purchase the insurance from the rental car company but you carry full coverage on your personal auto policy (meaning you have Comprehensive and Collision coverage). If you have an accident in the rental car, your personal insurance company will pay for the direct damage to the vehicle, less your deductible, but you are personally responsible for any Loss of Use or Diminution of Value claims from the rental car company. Loss of Use is basically the revenue the rental car company may lose because they are not able to rent out the vehicle you wrecked while it is being repaired. Diminution of Value is the loss in value to the vehicle because the vehicle now has a history as a wrecked vehicle. The Diminution of Value claim is a difficult one to quantify but some simple math can give you an idea of a typical Loss of Use claim. If it takes 3 weeks to get the wrecked rental car fixed and the rental company normally rents the vehicle for $25/day then they have lost $525 (not counting their administrative time for dealing with this incident). In this case, your would be responsible for your deductible (let's say $500) plus the Loss of Use ($525 and possibly more for administrative costs) and this loss will now appear on your personal auto policy and possibly impact your personal auto rates. While the rental car companies insurance isn't cheap, purchasing could save you a lot of money and a fair amount of hassle.
Bill Loran, CFP® is a partner at CrossStone Insurance & Wealth Management, Inc. and is passionate about providing high quality insurance advice and solutions