South Jersey Business Scene: Should you say yes to rental car insurance?

Monday, June 30, 2014

It depends, says PIANJ

Trenton, NJ – Whether you buy coverage from a rental agency or use your own car insurance coverage, it's wise to make certain you have enough insurance to pay for costly repairs if you suffer an accident in a rental car, says the Professional Insurance Agents of New Jersey.

"When renting a car, consumers should be ready to decide on insurance coverage before reaching the service counter," says Glenn Tippy, CIC, CPIA, PIANJ president. "A check with their agent or auto insurance company on whether their policy covers rentals can help make the decision." Consumers need to know that some policies may not cover rentals on business trips and may have other limits. Consumers with a policy that doesn't offer rental car coverage may want to consider paying the small fee for adding an insurance rider.

     Coverage on a New Jersey personal auto policy follows the policyholder while driving a rental car, but renters need to know that most personal auto policies have territorial limits. This means coverage will not apply outside stated locations; such as, the United States, its territories and Canada. However, a personal umbrella policy may fill some of the territory gap in coverage. "Consequently, the first consideration will be where the car is to be rented and what policy will be relied upon," says Tippy.
     Most states have a financial responsibility law that requires registered vehicles to have a minimum amount of liability insurance. Depending on the law in the state the car is rented and the wording of the renter's personal auto policy, the minimum coverage likely will be provided by the rental car company. Renters are given the option to purchase additional limits from the rental car company or use the automatic excess personal auto limits available on their own policy.
     Personal injury protection, medical and disability benefits coverage for injuries sustained in auto accidents, stands as one of the state's more unique auto insurance provisions. Policyholders should remember that PIP coverage follows the driver. A New Jersey operator of an out-of-state rental car still will have these benefits when operating that rental car.
     "Unfortunately," says Tippy, "the discussion gets more complicated when we consider damage to the rental car. Yes, the renter's personal auto policy may cover damage to the rental car, but its coverage has limitations." Personal auto coverage for a rental car is conditioned on the renter having at least one owned vehicle insured for its damage on the policy. If covered, there will be a deductible and payment will not exceed the repair or actual cash value of the rental car, along with a small amount for the rental car company's loss of use. Rental car contracts can hold the renter responsible for expenses that go beyond the coverage in a personal auto policy, which may include administrative fees, additional loss of use expense or diminution of value. "Renters who want to avoid risk will be inclined to buy the 'collision damage waiver' offered by the rental car company," says Tippy.

     If you are using a major credit card, rental car coverage may be available through the credit-card company. This coverage varies significantly by covered expenses, type of vehicle, location of rental and length of rental term. Typically, the coverage is secondary to a cardholder's own personal auto policy within the United States and primary overseas. "Check with your credit-card company for coverage details before you rely on it," says Tippy.
     Be sure to check the car's condition prior to driving it, suggests PIANJ. If it already is damaged, record the damaged areas on the rental contract. If damage occurs after you rent the vehicle, do not allow the rental car company to charge these damages to your credit card. If you are involved in an accident or suffer a loss, contact your insurance agent, or (if you have no auto insurance) your credit-card company, as soon as possible. This is important because the company providing the coverage needs time to inspect the vehicle and to be sure that all repair charges imposed by the rental car firm are proper and reasonable.
     For the policy that best meets your needs, you should contact your professional, independent insurance agent.

PIANJ is a trade association representing professional, independent insurance agencies, brokerages and their employees throughout the state.