Car Insurance Rate

One of my Ann Arbor insurance clients’ most common questions is “Does my auto insurance policy cover a rental car on vacation?” I wish that our answer could be a clear “yes”, but there are many shades of gray (caused by the fine print in the rental car contract!) to consider.

As a general rule, your auto insurance policy may extend to a rental car if:

1. You will be driving the rental car in the United States or Canada.

2. You drive with the rental car company’s permission. Please make sure everyone who might drive the rental car signs up as a ‘driver’ on the rental agreement. A driver who is not listed on the agreement does not drive with permission. Also, keep in mind that your auto insurance policy only covers the drivers that are listed on your auto policy. So if you are traveling and sharing a rental car with a friend, make sure they check to see if they are covered under their own auto insurance policy.

3. You are renting a car for short term use only. Short term generally means less than 28 days.

4. You are renting a car for personal use. Your personal auto policy generally does not cover business use. Therefore, if you use the rental car for business purposes, your loss may not be covered.

5. You have the necessary coverage on your auto policy. That means you not only have liability, underinsured motorist and personal injury protection coverage, but also comprehensive and collision coverage. If you dropped the latter two coverages on your own car(s), you would not have coverage for damage to the rental car (such as broken windshield or collision loss.)

6. You are renting a private passenger automobile. Clients often ask if they need to buy coverage for a moving van. The answer is Yes. There is no coverage for damage to the rented moving truck because it doesn’t fit the description of “private passenger auto” in your insurance policy.

All this sounds like your auto policy might cover you for a rental car, doesn’t it?

So why do we recommend that you consider spending vacation dollars on the rental car company’s insurance? Because we don’t want your vacation spoiled by delayed travel or a surprise charge to your credit card due to “traps” in the rental car contract!

Here are the most important reasons for doing so:

Loss Valuation: The rental agreement may very well contractually obligate you to reimburse the rental company for the “full value” of the vehicle. But an auto policy covers only the amount “necessary”
to repair or replace the damaged property. Result could equal several thousand dollars…yikes!

Loss Payment: The rental company may require immediate reimbursement for damages, and it is a customary practice for the rental company to charge your credit card. This could “max out” your credit card – just when you needed it for vacation.

Loss of Rental Income: If the car you rented gets damaged and needs repairs, the rental car company cannot rent it during the repair process, which can often exceed several weeks. In most cases, the fine print in your rental agreement will stipulate that you owe the rental company for loss of rental income during the repair.

So the best answer to the question “Am I Covered While Renting A Car On Vacation?” is to make a quick call to your insurance agent to discuss the details. That way you can make an informed decision when deciding whether or not your auto policy gives you enough coverage while you are on vacation.