With so many different answers to this question available on the Internet, is it any wonder that consumers feel such uncertainty over how to respond when the friendly rental car representative skillfully coaches them on the importance of accepting the insurance offer in front of them? Forget for a moment the surprising lack of industry consensus on this issue. Instead, consider the human factors contributing to the unease most consumers’ experience.
Benefits of Purchasing a “Damages Waiver” from the Car Rental Company
Rental car companies do not sell insurance but instead offer to “waive” the costs they will incur after a theft, collision, or other damage to the vehicle they make available for rent. Those advising consumers who own a car with comprehensive and collision coverage that their personal policy will be available to pay for damages to a rental car from theft or collision are correct, but only partially correct. Let’s agree that being partially correct is not a good advisory practice.
Rental car companies experience many different costs when a car is damaged or stolen, and those who decline the damages waiver are contractually accepting the responsibility to pay for those many different costs. Following are the risks that are eliminated when purchasing the damages waiver from the rental car company that are often not covered by other protection solutions. As a result, transferring these risks back to the rental car provider by purchasing the waiver is a protection strategy well worth considering.
- Nickel-and-dime claims: Often, minor scratches, dents, etc., can result in damages in the hundreds of dollars and well below the collision deductible on a personal auto policy, resulting in an out-of-pocket expense for those who decline the waiver.
- Loss-of-use costs: Damage that results in the rental company alleging the time it took to repair the car prevented it from earning rental income for a period of time can result in “loss-of-use” charges.
- Before-and-after costs: The costs that arise when the value of a rental car becomes diminished after an accident are rarely covered by traditional personal insurance policies. They can also be significant.
- Extra fees: Purchasing the damages waiver from the rental car provider will also waive “administrative expenses” incurred after a loss. Essentially, these are soft costs incurred after a claim such as storage, claims adjustment expenses, and towing. While these costs are not often very significant, they are also not covered by most personal auto insurance policies.
- Loss settlement disputes: Insurance practitioners well understand the challenges that arise in trying to agree on the value of a damaged car that has been determined a total loss. The cost the rental car company requires to replace the car may be far higher than the actual cash value loss settlement the personal auto insurer will pay.
- Time and aggravation: Among those who opt to purchase the waiver from the rental car provider, the reason most often cited for doing so is the “reduced hassle and peace of mind” factor. Reducing the time and angst of documenting the condition of the car before and after the rental is a big benefit.
- New claim activity: Those who prefer to transfer the risk of damage from the rental car company to their auto insurance provider should be reminded that doing so can have an impact on the terms of their personal coverage.
Alternative: Relying on a Personal Automobile Insurer
Especially for those renting a car in Kenya for many days or even weeks, the cumulative costs of paying for the damages waiver cause many to decline the waiver and transfer the risk of possible damages to the insurer providing personal automobile coverage. Except for a few countries, consumers who wish to do so must have comprehensive and collision coverage on their personal auto policy. Consumers should be reminded that claims requiring loss of use, diminished value, administrative charges, and variances in valuation disputes can be costly and are not covered by standard auto policies. Knowing about these risks can help consumers determine if electing to save the cost and self-insure is a risk worth accepting.
Coverage from Credit Card Providers
Many who assert, “I’m covered by my credit card” would be wise to reexamine the protection they believe is available to protect them. First, cardholders should be aware the coverage provided by any credit card provides collision and theft coverage but not liability or personal injury protection. And, with very few exceptions, the collision and theft coverage provided by credit card companies is secondary to the coverage provided by the cardholder’s automobile insurance provider. For cardholders with an auto policy that does not provide comprehensive or collision coverage protection, coverage provided by the credit card company would be available to assist with physical damage and theft claims, although many conditions apply.
Following is a very brief summary of the current rental car protection available through major credit card companies.
It is no easy task helping consumers understand the many risks that arise when renting a car. Also, explaining the scope and limitations of the various forms of protection requires an even longer discussion. A common “best practice” guiding many insurance practitioners is to instead embrace the broad-brush legal guidance aimed at reducing exposure to errors and omission claims. Advising all clients to always accept the coverage offered by rental car companies will surely reduce an agent’s exposure to errors and omissions claims. Conversely, emboldening consumers who wish to avoid the cost of damages waivers from rental car companies and advising “You’re already covered, just decline” is an incomplete answer, at best.
Renting a car for just a day (or even a few days)?
- Why not simply remove the hassle and the possibility of uncovered costs arising from a possible claim and purchase the damages waiver? This decision not only eliminates the potential for financial risk but also, more importantly, the time and aggravation of being involved in claims disputes between the car rental company and other parties.
- When doing so, be aware of the conditions of the waiver, especially who can and cannot drive the car.
Renting a car for a period of time that causes the total cost of buying the waiver to exceed your personal financial pain threshold?
- If the daily cost of the waiver spread over many days exceeds what you are willing to pay, embrace alternative protection strategies to reduce the risks when declining the waiver.
- Examine purchasing personal automobile coverage from one of the few insurers that provide greatly broadened protection for rental cars.
- Understand the benefits available from your credit card(s) and rent the car with the credit card providing the broadest protection. Consider adding a credit card provider offering increased protection.
- Embrace the simple “best practice” of using the camera or video feature of a cell phone to carefully document the condition of the rental car before accepting and upon returning it. Be sure the images include the rental car representative who will also be documenting the condition of the car.