When renting a car, many travelers routinely sign the rental forms without reading the fine print. They shouldn't: The forms contain warnings that a renter should be aware of, and some rules that, if violated, could end up costing thousands of dollars.
Part of the fine print deals with the renter's responsibility if the car is damaged, information you need to decide whether to buy the collision damage waiver offered by the rental company. Other parts of the contract describe the liability insurance provided by the rental company to cover damage to someone else's property or personal injuries, and there, too, you have to decide whether to buy more coverage -- if you are renting from one of the few companies that will sell it to you.
The time to check these details is not when you get off a train or plane and rush to the rental counter. Before you pick up your car, do your homework.
To make sure you don't buy too much or too little insurance, you should ask your auto insurance agent to detail, in writing, what coverage your policy provides if you rent a car. In many cases, your policy may provide all the protection you need.
You should also question the car rental company, when you make your reservation, about the insurance coverage it offers. Rental contracts differ substantially among the major rental firms.
And you should find out if you are eligible to use your employer's corporate account with a car rental firm for vacation travel. Of course you will pay for the rental, but by using the corporate account you may get a better deal on rental car insurance, and possibly on the rental itself.
Insurance is a very important item in any car rental agreement, but it also confuses many travelers. To make the right choice about what and how much to buy, consider these suggestions:
Collision damage waiver: All of the major car rental companies have now shifted more -- and often all -- of the responsibility for collision damage to a car to their customers. A vacationer who walks up to the rental counter without a corporate account number normally will be held responsible for any damage up to the full value of the car -- which could easily be $10,000, and considerably more for the larger, luxury models.
The rental companies will free the renter of that potential burden if he buys, at a hefty price, a "collision damage waiver." (To avoid state regulation of their rates, the companies argue that these waivers are not insurance.) Typically, CDW, as it's called, costs about $9 for each day or portion of a day the car is rented. On luxury cars CDWs are usually $10. They are rarely discounted, even for weekly or longer rentals.
That means that someone buying a CDW for a weekly rental could end up paying $63 for the CDW and perhaps only $97 or less for the car itself. If you turned the car in an hour late, chances are you would pay another $18 or $20, half of it for CDW for a full extra day and about half for the hour's rental.
With the cost of CDWs so high, and the potential cost of not having bought one so much higher, a traveler should make sure -- in advance of the trip -- whether buying one makes sense. For most renters, collision damage waivers are not needed. For a small minority, they could be essential.
The first thing to consider is whether you have collision coverage on a car you own. If you do, chances are that the same coverage would apply to a car you rented for personal use.
GEICO Insurance Co., for instance, extends such coverage to a rental car if the rental period is less than a month. If you have collision coverage on more than one car, a GEICO service representative said the company assumes that the rental car, in effect, is replacing the vehicle with the highest amount of coverage.
But other companies might have quite different policies. The only way to be sure is to get in touch with your insurance agent, or the company if you deal with them directly. And you should do it in writing, asking a set of specific questions about your own policy, ranging from "Am I covered at all while driving a rented car?" to "What are the limits on coverage if the rented car is worth more than my own car?" and "Does it apply in cases of hit-and-run or an accident involving an uninsured driver?"
In other words, when you walk up to the rental counter, you should know just what your own insurance will cover and what it will not. With that knowledge, you can make a reasonable assessment of whether a CDW is worth its quite high cost.
Other points to keep in mind:
Many corporations that have contracts with the car rental companies not only allow employes to use their corporate account numbers for personal rentals but encourage them to do so. For one thing, more rental activity on the account could give the corporation a better deal with the rental company in the future.
If you can use a corporate account number -- with you paying the charges, of course -- check in advance with your employer to see what collision liability goes with the account. Under most, the potential liability is capped at $2,000 or $3,000. Your own auto insurance policy likely will cover most of that.
Collision damage coverage may also be offered by one of your credit cards. Some automatically provide such protection if you charge the rental on that card, usually with an upper limit of perhaps $3,000. What the cards actually do is pay the deductible for which you would be liable if you used your own insurance policy to reimburse you for the cost of the damage. If you do not have your own collision coverage, the card issuer would pay up to $3,000.
The rental companies note that if you have collision coverage under your auto policy, you will still be liable for whatever deductible the policy calls for. In addition, you will have to file a claim under that policy and perhaps end up paying a higher premium in the future as a result of the claim.
The rental companies also point out that, whatever your own coverage, you -- and not your insurance company -- are liable for damage to their car. They can press for immediate payment without regard to when you might be reimbursed by your insurance company. Some rental companies also require a deposit of several hundred dollars, usually in the form of a signed credit card charge slip, if you do not purchase a collision damage waiver.
Somewhere on the rental contract will be a space for you to sign or initial signifying that you accept or decline to purchase a CDW. Most now indicate what your maximum liability will be, though that may be stated simply as "full value." The fine print on the back may also say that you will be liable not only for the cost of any damage to the car but also for "reasonable loss of use" -- that is, the company will want to be reimbursed for the loss of rental time while the car is in the shop. The company might also try to tack on a charge for administrative processing.
But lest that make you start to wonder about whether a CDW might not be a good deal after all, keep reading the fine print.
Typically, the rental contract will specify some restrictions on the car's use. For example, Budget Rent a Car's contract provides that the car "will not be used or operated by anyone:
A. Who has obtained the vehicle by using false or misleading information; or
B. Who is not capable of safely driving the vehicle due to alcohol, drugs, drowsiness, or otherwise; or
C. To transport people or property for compensation; or
D. In any race, training activity, contest or for any illegal purpose; or
E. To push or tow any vehicle or other object; or
F. In any abusive or reckless manner; or
G. On other than regularly maintained roadways; or
H. In Mexico, without the prior written permission of the renting location."
Okay, so you are not taking illegal drugs. But what if you take some medication that makes you drowsy and you hit a tree? Another provision of the contract says that if there is collision damage, to have the CDW be honored by Budget, you must report the accident to local police within 24 hours. If the police report says you fell asleep at the wheel, for whatever reason, then the collision damage waiver is void.
Similarly, a police report that says that excessive speed contributed to an accident could mean Budget would seek to void the CDW on the grounds that you operated the car in a reckless manner, under item "F." And don't figure that there is no danger in being a good Samaritan and offering a push or a tow since you have a CDW. Under item "E" you might have to pay.
Liability insurance: There is another insurance wrinkle hidden in the contracts' fine print. If you are not renting under a corporate account number, many of the rental companies provide liability coverage -- that is, to cover damage to other property or personal injury if you are at fault in an accident -- whose limits are equal only to the minimum required by the state in which the car is rented.
In a recent ad, Alamo Rent A Car said a special four- to seven-day rate in Florida and Hawaii included CDW, personal accident insurance, unlimited mileage, primary liability coverage and a four-door economy car. In a footnote it explained that the primary liability coverage "is equal to the minimum state limits permitted and does not include uninsured motorist."
In many states, those minimums are woefully inadequate given the potential liability from an accident. Several states, including Florida, have minimums as low as $10,000/ $20,000 -- that is, up to $10,000 for any person injured or a total of $20,000 for all persons injured in a single accident. However, as with CDWs, your own car insurance should come into play here.
If you have no insurance, this is a much greater potential liability than just the full value of the car. Hertz has been running ads noting that it includes $100,000/$300,000 worth of liability coverage in the basic rental price. These are the usual figures for coverage at most companies if the rental is under a corporate contract. Thus, it could be worth your while to rent using a corporate account number even if doing so does not give you a price break on the rental itself, as would be the case with many weekly rentals. Using the number may give you more liability coverage, as well as a reduced exposure for collision damage.
But, again, look at the fine print. Budget's contract says that if you violate any of its specified "use restrictions," its liability coverage does not apply if the company has the right under law to exclude it. If coverage cannot be excluded, then it is reduced to the applicable state minimum.
In other words, if you are relying on the higher coverage because you rented using a corporate account number, Budget is asserting the right to reduce the figure to state minimum.
Unlike in the case of CDWs, which the companies argue is not insurance but a waiver of their right to be paid if you damage their property, many of the rental firms will not even sell you additional liability coverage. The "personal accident insurance" mentioned in the Alamo ad is not liability insurance. Rather, it would pay you, the renter, if you get hurt, not if you are driving and hurt someone else.
Hertz is an exception. It offers higher liability coverage to begin with, and will, for $4.95 a day, sell you additional coverage with a $1 million limit rather than $100,000/$300,000.
The rental companies want to avoid having CDWs regarded legally as insurance because they would then, in some states, have to get approval for the rates they charge for CDWs. Some states have sought to force the companies to get such approvals, but so far none has been able to do so.
Whatever decision you may make about buying a collision damage waiver, make it before you pick up the car. James T. Yenckel is on assignment.