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Should I Buy Rental Car Insurance?

Buy Rental Car Insurance

Many of us have been at the rental car counter and asked, “Would you like to purchase the insurance coverage?” And there is a momentary pause, because you don’t know. You ask yourself, “should I buy rental car insurance?” Or you wonder, “Does my current auto insurance cover me in a rental car?”

Like others, you don’t know, so you just buy the coverage … better to be safe than sorry.

If you’re wondering if your auto insurance policy will cover you in a rental car, you’re not alone, our insurance agents are frequently asked about coverage for rental cars.

The answer to the questions is a bit nuanced. First thing to note is, most auto insurance policies will cover your liability when driving a rental car, but the physical damage coverages are not always transferred to a rental, or any other temporary substitute for that matter.

In addition, even if your auto insurance policy does transfer to a rental car, for both liability and physical damage coverages, it may not cover what is called “diminution of value.”

What to know about liability coverages and auto insurance

As we said, most auto insurance policies will afford liability coverage to you when driving a rental car. Your liability coverages are those that cover you for accidents you cause for Bodily Injury or Property Damage.

That being said, there are some auto insurance policies that will not transfer your liability coverage to a rental car, or they only do it under specific circumstances. Auto insurance policies set forth specific rules in the policy language that control when coverage will transfer to a temporary substitute vehicle. You need to understand what these circumstances are before you make the decision to reject the insurance coverage offed by the rental contract.

While we can never say with 100% certainty that your auto insurance policy will cover your liability when operating a rental car, the chances are highly likely that your policy will cover this exposure.

But still, the best way to know if your auto insurance policy will transfer liability coverage when driving a rental car is to ask your insurance agent.

Do physical damage coverages transfer to a rental car?

This is where the questions, “ should I buy rental car insurance? ” is really a good one.

When we talk about physical damage coverages, what we are really talking about are your collision and comprehensive coverages. These are the coverages that provide protection for damage to your car when it collides with other vehicles or property, or from “non-collision” damages like hail, theft or vandalism.

These coverages are typically not compelled by regulation or law, and are typically considered optional. (Note: most of our readers hail from sunny California, so we aren’t really expanding on the differences in Michigan or other no-fault states where Collision coverage may, in fact, be required).

The primary purpose for your collision or comprehensive coverages is to provide protection for your “covered” or “listed” cars, not for other cars you may be driving. However, as a value added benefit, some insurance carriers will extend these coverages to temporary replacement vehicles, like rental cars.

To know if your insurance policy will extend collision and/or comprehensive coverages to a rental or any other temporary replacement coverage you need review your actual policy language to understand how it defines a temporary replacement vehicle, AND if there is a change in the definition for the physical damage coverages.

If your auto insurance policy does extend the definition of a temporary replacement vehicle, it may limit it to certain circumstances, like when the insured vehicle is being repaired or temporarily disabled. It most certainly is not for extended periods of use of an unlisted vehicle.

On some insurance policies, the coverage may even extend to a vacation rental, but there would be clear language setting forth when this would be triggered. For instance, the policy may set forth that the vehicle needs to be rented a certain number of miles away from the primary residence.

In each instance, you need to carefully read you policy to understand when, to what extent, and under what circumstances your auto insurance policy may extend physical damage coverages to you temporary replacement vehicle or rental car.

The best way to know be sure, it to once again consult your insurance agent.

What do you mean by diminution of value?

When you rent a vehicle and have an accident, the rental car company may look to recover “diminution of value” from the person who is liable for the accident. So, if you are the person who is “at-fault” or liable for the accident … this means you.

What the rental car company is looking for is an adjustment in the loss of residual sales value of the rental car, and maybe even days where the rental vehicle was not available to be rented … so lost revenues.

I most cases, your insurance adjuster will work to help you avoid paying these amounts, but a persistent rental car company may pursue you directly for these losses.

In some cases, and this is much more rare, your auto insurance policy will even cover these losses. But once again, you need to ask your insurance agent, as this isn’t a typical coverage offered.  MetLife does offer this type of protection in the basic auto insurance policy, other may offer it by endorsement. So be very cautious here, and don’t assume you have protection without asking first.

If for no other reason, just to avoid this particular circumstance, to answer the question “should I buy rental car insurance?” You may want to just to be sure you don’t get involved in this argument with your rental car company.


So, if you’re still asking, “ should I buy rental car insurance? ” then maybe you just should to save the headache.

We have said this in other posts, not all insurance policies are made equally.  Even auto insurance policies. This is just one example of how auto insurance policies can define and interpret things differently and provide more … or less … protection.

As consumers, just like when purchasing any good or service, we need to fully understand what we are buying. Your auto insurance is not a commodity, even if many companies and agents try to sell it like one.

Your insurance is a financial service provided to protect your assets, it is a complex legal document with definitions, conditions and carefully crafted rules for when coverage applies, or doesn’t. Proceed with cautions, ask good questions, and please consult with an insurance agent if you feel even the least bit uncertain.

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