One of the most common insurance questions that we're asked is about what whether or not an auto insurance policy covers a rental vehicle. It’s a good question! I wish there was a simple "yes" or "no" answer, but unfortunately it's more complicated than that. In order to answer this common question, we'll need to ask YOU several questions of our own.
Let's start with addressing who will be paying for the rental vehicle and then see if your insurance policy provides coverage while you're driving the rental vehicle since the rental company will want you to purchase their insurance (sometimes called a physical damage waiver).
Will my own insurance policy pay for the rental vehicle?
Why do you need the rental vehicle?
If you’re going on vacation, your car needs a mechanical repair, or you don’t have a covered claim, then you will be paying for the rental vehicle even if you carry rental coverage on your insurance policy. The typical “Rental” coverage only applies when your vehicle is not safely drivable due to a covered loss (collision/accident, fire, windstorm, vandalism, theft, etc.). If your insurance company isn’t going to be paying for repairs to your vehicle because of an insurance claim, then you will not likely be able to use your rental coverage. This simply means that they aren’t going to cover the daily rental rate, it doesn’t mean that you aren’t covered while driving the rental vehicle. Let’s see how that works…
Are you covered while driving a rental vehicle?
Who is going to drive the rental vehicle?
Most policies provide coverage for the named insureds and the listed drivers residing in your home when you borrow or rent a vehicle. That means that if your name is on the insurance card or declaration page of the policy, then you most likely have liability coverage. Drivers that are listed as “Excluded” do not have coverage. If you let someone else drive the rental vehicle, your insurance company is not responsible for them and your policy will not pay. They need to provide their own coverage if they drive. Also, you need to notify the rental company by listing them on the agreement. They will need to provide their own proof of insurance.
What coverages do you have on your own vehicle?
If you only pay for liability coverages, then you will have to purchase the physical damage waiver from the rental company. When you carry liability, comprehensive, and collision coverages, then you will usually have the same coverages follow you into the rental vehicle. Except, we need to ask this next question…
What type of rental vehicle do you plan to use?
In case you haven't noticed, other than the title of this blog, I've been using the term "rental vehicle" instead of "rental car". There's a reason for that! Are you planning to rent a private passenger automobile, trailer, or a 15 ft. box truck (U-Haul type) that weighs more than 10,000lbs? If you are renting a private passenger automobile or "car", then you will likely have coverage. If you are renting the large box truck, you’re less likely to have coverage. Each company has their own definition of a "covered auto". So, we'll need to check your specific policy for this answer.
If the vehicle you are renting is not a temporary substitute of one of "your covered autos", then you will likely need to purchase the damage waiver from the rental company. If you are renting a vehicle to go on vacation and one of "your covered autos" will be parked during that time, then you would likely have coverage in the rental vehicle.
Once we determine whether or not your policy will extend coverage for you while driving the rental vehicle, then you can decide if you want to purchase the insurance offered by the rental company. Here’s why you may decide to pay that extra $14+/day. When you rent a vehicle, you assume responsibility for any damage to it including a chip in the windshield from a rock, theft, a hailstorm, or if someone hits it in the parking lot, etc. Yes, you are even responsible for hail damage to the vehicle while you’re on vacation in Florida! Would you want that claim turned in to your own insurance company? If not, then you will want to purchase the rental company’s insurance.
Oh, there’s one more thing that you need to find out…does your policy cover the “loss of use” of the rental vehicle if it is damaged while you're using it and then has to go into the shop for 3 weeks for repairs? The rental company can charge you the daily rental rate for every day it is in the shop and can’t be rented out. Some policies will provide this coverage and others won’t. So, be sure to ask your agent.
It sure seems I’ve asked you more questions here than I’ve answered, but that’s kind of how it goes in the insurance industry. 😊