When I’m on vacation, the last thing I want is a delay at the airport car-rental office, so I fly through the paperwork, automatically checking “no” when asked whether I want rental insurance. I figure the question is redundant anyway, as state law says my personal automobile insurance is supposed to cover me, even when driving a rental. Why waste time and money on insurance I don’t need?
I felt confident in my logic when I mentioned rental insurance in my last column, but since then, all I’ve gotten are e-mails from readers who’ve paid dearly for not buying it. When Malden insurance agent Rick Beecoff, a family friend, informed me that I was correct “to an extent, ” I knew I was in trouble.
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Armed with a list of questions, I drove to Donna McKenna’s office at the Massachusetts Association of Insurance Agents in Milford. A copy of my last article, flagged by a coworker, was already on her desk, ready to be redressed.
“I work in the industry. I understand what’s covered. I buy the insurance,” said McKenna, vice president of communications for the association and a 40-year insurance industry veteran. “There’s a lot to it.”
To put it bluntly, renting a car or moving van is almost always a risky proposition, she said, no matter how much personal car insurance you have, or how much extra insurance you buy from the rental company. And don’t blindly assume your credit card will protect you. “I hate to say it, but I’d rather not rent a car, ever,” McKenna said.
Most of us will need to rent a vehicle at some time, of course. When you do, here’s what you should know.
Your personal auto insurance policy will cover personal injuries, property damage, and collision damage (if you carry collision insurance) when you’re driving a rented car, in many ways just as it would if you were driving your own car, so long as you’re in the United States, including its territories or possessions, or Canada. (It applies no matter what kind of car you rent, so go ahead and splurge.) As with your own vehicle, you’re responsible for any deductibles on your policy.
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But there are other costs your personal policy will rarely cover; in particular, the rental company’s lost income from having the car it rented to you tied up in a repair shop.
Say you rent a car for $50 a day and get into a fender-bender. If it takes a week to repair the car and settle the insurance claim, the rental agency could charge your credit card $350 for “loss of use” of their vehicle, regardless of whether you caused the accident. Since another customer might have purchased rental insurance over those seven days, the company might also charge you for lost rental insurance income, which could be hundreds more.
Next example. Say the car you’ve rented is stolen or totaled in an accident. Your personal auto insurance will determine the value of the lost vehicle based on a standard formula, set by a Massachusetts state regulation, that’s based on the car’s retail book value and prior condition. (The legal term for this approximation is the “actual cash value” of the vehicle.) But the rental agency is free to use its own formula to determine the vehicle’s replacement cost, and it might want a brand-new model of the weathered car you totaled.
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If the rental company wants more than the amount your personal auto insurer has determined the vehicle is worth, you could be charged the difference on your credit card. Which brings us to our next major point.
Rental agencies typically don’t file a claim with your personal auto insurance company when there’s a problem, McKenna said. The rental agreement you sign usually allows the rental agency to bill your credit card almost instantly for damage repairs, loss of use, and administrative fees it incurs. They could even put the entire cost of replacing a vehicle on your card with no advance notice.
“We had a case once where a doctor was playing golf in Pebble Beach and his rental car was stolen,” McKenna said. “The rental company charged the entire cost of the vehicle to his credit card, which made him exceed his credit card limit. So when he went to check out of the hotel, he couldn’t, because he couldn’t charge anything else to his card.”
Your personal auto insurance company won’t cover charges to your credit card upfront. It’s up to you to file a claim with your insurer, which often includes making a police report and taking photos of the damaged vehicle, then waiting to be reimbursed.
At this point in my interview with McKenna, I was convinced that I’d been a fool to have never purchased extra rental insurance, and to have advised readers as much. But three more important caveats apply.
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First, daily insurance is expensive, potentially adding hundreds of dollars to the cost of your rental. If you were to book a Toyota Corolla for five days in Boston from Hertz, you’d pay $225 for the car and another $115 for basic rental insurance, according to the agency’s website. Booking a midsize SUV on Budget’s website for five days, you’d pay $315 for the vehicle and another $204 for all additional insurances.
Buying rental insurance can be confusing because companies offer an array of choices, often labeled under their proprietary names. Hertz sells six types of insurance for the one vehicle you’re renting, with explanations that run several pages. To understand what each insurance covers, you pretty much have to read everything.
Finally, even if you buy every insurance product the rental company sells, there’s no guarantee you’ll be covered for every contingency, McKenna said. Some will cover “loss of use” fees, but others will not, and there are frequently other exclusions in the fine print.
“I rented one of the yellow moving trucks — it was Ryder — and I bought the additional insurance and read the additional insurance, because, well, that’s what I do,” McKenna said. “I found that it covered everything but the roof. If you went under a low bridge and the roof got opened up like a can of sardines, it was on you. So naturally I was a nervous wreck the whole time I was driving it: ‘Is this bridge too low? Maybe we shouldn’t go this way.’ So insurance doesn’t cover everything.
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“They offer what they offer, and you have to be prepared to pay for the rest.”
More on credit card protections, and tips about renting Zipcars and moving vans, next time.
Peter DeMarco can be reached at demarco@globe.com. Follow him on Facebook at “Who Taught You to Drive?” and on Twitter @whotaughtU2driv.