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Coverage Gaps with Rental Cars

from Brodbeck Porter Insurance Agency
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Oct 6, 2016

If you have a personal auto insurance policy, your liability, medical and uninsured/underinsured motorists coverage will transfer to a rental car in the U.S. or Canada. If you have an umbrella policy, liability coverage also will usually transfer to a rental abroad.

What about your liability for damage to the rental car itself?

If you have collision and comprehensive coverage on at least 1 of your vehicles on your personal car insurance, that will transfer and cover the rental car as well, but not necessarily for every expense you're liable for in the rental contract.

For example, collision coverage will not cover your responsibility for diminished value claims. If you are driving a $30,000 rental car and cause $5,000 worth of damage, your collision coverage will pay for that, subject to your deductible. But it won't cover the resale value of the car that has dropped.

Diminished value claims happen when the market value of a car that has been in previous accidents is far less than it would have been if it were accident-free. The rental company offers a solution called collision damage waiver, or CDW, that covers all your renter obligations, but that too has a few coverage gaps.

For example, there's no coverage if you had a single drink. There's no coverage if you drive carelessly. There's no coverage if you drive on an unpaved road. There's no coverage if an unlisted driver causes the accident.

If you want coverage for diminished value claims or if you don't have a car with collision coverage that would transfer to a rental, buy the CDW coverage from the rental company. Just be aware that there are some exclusions in that coverage.

Since the collision coverage on your car won't apply outside the U.S. and Canada, be sure to buy the collision damage waiver when renting cars abroad. And if you don't have an umbrella policy that covers car rentals abroad, buy the optional liability coverage as well.







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