Auto Insurance Replacement Rental Vehicles: What You Need To Know

Renting an insurance replacement vehicle can be a stressful experience. After all you are renting a vehicle only because yours is in the body shop, or worse yet has been stolen.  Knowing your insurance policy rental coverage limitations and the rental company contract provisions and how they apply can help ease the anxieties associated with this experience.

Your insurance policy sets forth the parameters of the insurance replacement rental provisions by which you are bound.  Most insurance policies will only provide direct payment or reimbursement of a “comparable vehicle”.  This means that the larger and nicer the vehicle you insure, the larger and nicer your rental car can be.  Of course there are no 5 year old rental vehicles, with the exception of Rent-a-Wreck and the like, so you will often end up with a newer and cleaner vehicle just because you are renting a car.  Your policy also limits the cost per day and time frame which is allowable.  The daily limit applies to your insurance replacement rental, even if you have not yet exceeded the maximum limit.  In the case of a total theft of your vehicle there is a 48 hour waiting period before a rental car is covered. Most insurance replacement rental companies will waive this waiting period, so that you do not have to incur the charge yourself. The waiting period is a requirement that insurance companies put into place to prevent having to incur charges for a vehicle which was not actually stolen but missing.

It is important to be aware that the owner of a rental vehicle has no obligation to provide you with insurance coverage for the rental period except as mandated by the laws of your state.

When renting an insurance replacement be sure to make the rental company representative aware of any damage or missing parts.  Most rental companies will inspect the vehicle with you before you take it off their premises, and make a written record of anything they note or you bring to their attention.  If you do not make the company aware of damage, you may be charged for having caused it, or for having it occur during the time frame that you had custody of the vehicle.  If damage or theft occurs while the vehicle is in your possession you must notify the rental company on the day of occurrence if at all possible. Even if it is more cost effective, do not authorize repairs to a rental vehicle.

Returning the vehicle at the scheduled return time and day is a contract provision you are bound by.  Retaining use of the vehicle after that time can be considered embezzlement. In California, for example, you must return the vehicle to the owner within 5 days of the date on your contract, or be considered to having committed vehicle embezzlement.  Be sure to check the required drop off times.  Late drop-off of a vehicle, without notification, may subject you to charges for an additional day or weekend.

Be sure to note the amount of fuel in the vehicle at the time of rental. The fuel gauge position should be noted on the contract. It is permissible and usual for the rental company to charge you a different per gallon charge than the pump price. Sometimes you will be given the option of paying for fuel in advance, so that you do not have to stop for gas before returning the vehicle.  If you utilize this option, be sure to evaluate whether the per gallon charge is economical. Extra fuel you put in the vehicle, over the amount which was in the rental car at the time of pick-up, will not generally be reimbursed.

Dropping the vehicle off at a different location than the one rented from can cost you $200 or a $1 a mile recovery fee, whichever is greater.

Moving and parking violations, fees and penalties can cost you an additional administrative fee if received by the rental company after conclusion of your rental period.  These charges can also incur late fees if not paid within 30 days.

Common limitations on use of the rental vehicle include:

• Transporting passengers for hire
• Driver training
• Carrying more passengers than the vehicle has seats
• Allowing occupants to ride outside the passenger compartment
• Taking the vehicle outside the states shown as allowed on the contract
• Traveling on unpaved roads or off-road
• Reckless conduct
• Towing or pushing anything
• Speed contests
• Impairment due to alcohol or drugs

Under no conditions should a rental vehicle ever be driven into Mexico, without the rental company’s prior written consent.  A Mexican insurance policy is required for such forays.  Additionally the coverages on your rental contract are not applicable in Mexico.

Personal Injury Protection, No Fault Benefits, Medical Payment Coverage and Uninsured/Underinsured Motorists Coverage are only provided by a rental company if the state you are renting in requires it.

When renting a replacement vehicle you will generally be asked whether you wish to purchase the Damage Waiver.  The cost for this coverage is between $9.00-19.99 for every rental day.  If you do not purchase this coverage you are responsible for any collision damage up to the fair market value of the rental vehicle.  A personal auto policy will cover damage to a car you do not own on an excess basis. This means that if there is other insurance which applies it must pay.  If you rent your insurance replacement vehicle with a major credit card, and have car rental loss and damage insurance through the card, that coverage is excess over any other insurance which applies.

This means that if you were to have an accident with your rental vehicle.  The Damage Waiver, obtained through the car rental company, would be first in line to pay, then your own personal auto insurance policy, and lastly the car rental loss and damage insurance on your credit card.

If you take out the Damage Waiver, with the car rental company, you can avoid having to notify your own insurance company if you have an accident with a rental car.

Should you chose to decline this coverage, you must present a claim to both your own personal auto insurance policy, and then also to the credit card’s car rental loss and damage insurance plan, since each of these policies is excess over other insurance.

For these reasons, whether you purchase the optional Damage Waiver from the car rental company, should be based on your driving record, how many miles a day you travel, where you drive, and your comfort level with driving an unfamiliar vehicle, as well as the additional economic impact of purchasing this protection.

There are two other optional coverages that are generally offered rental companies.  The first of these is Personal Accident Insurance and Personal Effects Coverage.  These coverages have exclusions and per person as well as aggregate limits. Be sure to know what you are purchasing if you decide on this coverage. The cost can be as high as an additional $11 a day for both coverages.

The third optional coverage is Supplemental Liability Protection.  This coverage provides minimum financial liability limits and excess coverage which take the place of the third party coverages on your personal auto policy.  The coverages provided under this protection tend to be more limited than what is covered on a personal auto policy, although duplication of coverage can occur if you purchase this protection.  The charge is generally about $12 a day.

In 1984 there were a series of lawsuits filed against rental companies in California and Florida for excessive additional insurance coverages.  It is ironic that the Damage Waiver coverage charged at that time was substantially less than what is charged today for the same protection.

My best advice is to know what risks you are taking in renting a vehicle and to act accordingly in deciding what optional coverages make sense to pay for based on this knowledge.  The per day charges on a car rental agreement can add up very quickly, be sure to take your time in reviewing and signing for any optional charges.  The result will be evident in your pocketbook.