Rental Dilemma: No Easy Answer on Temporary Car Insurance

By Dave DeWitte, The Gazette, Cedar Rapids, Iowa

Apr. 11--On the list of questions that property and casualty insurance agents are asked all the time, one just about always lands near the top.

"Does my car insurance cover a rental car?"

The question is a good one, according to veteran insurance agent Ron Sunderman of Skogman Carlson Insurance in Cedar Rapids, and the answer used to be simple.

If the policyholder had comprehensive and collision on their auto insurance policy and a gold Visa or Mastercard, there was rarely any cause for concern. The same coverage and deductibles that drivers carry on their personal auto policy usually apply to a rental car, provided it is used for pleasure and not business.

Gold credit cards often provide rental car insurance, or at least cover the deductible amount on the cardholder's personal auto policy.

Such credit cards also can help if the rental car company claims damages for the "loss of use" of a rental car while damages are being repaired.

"You might be held legally liable for loss of use, but Visa and MasterCard will challenge that and make them show that the car was the last car available on the days it was being repaired," Sunderman said.

In recent years, rental car companies have added a new wrinkle. It could sway some drivers who were previously content with their existing coverage to take the rental car policy.

It's called "diminution of value," or, in plain English, "diminished value."

Many states require that vehicles resold after an accident that caused major damage carry a title that brands the car as a damaged or salvaged vehicle. The amount of damage that requires a salvage title varies from state to state.

Carrying a salvage title can greatly diminish the resale value of a rental car.

Most rental car companies state in their rental contracts that they can bill the customer for the difference in the value of the vehicle after an accident while they were renting it, and the amount it would bring at sale before it carried a salvage title.

"If you signed something that says you are liable for any diminution of value, you have put yourself on the line for a multi-thousand-dollar claim," Sunderman said. "I, myself, don't like $5,000 surprises."

The answer is to buy the rental car agency's "collision damage waiver" or "loss damage waiver," which typically costs between $9 and $19 per day, according to the Insurance Information Institute.

Still, the degree of risk aversion that causes travelers to buy rental car insurance is a highly personal matter.

At The Eastern Iowa Airport, Kent Miller of Santa Rosa, Calif., gladly shelled out $40 for insurance on his one-week car rental Tuesday.

"It's peace of mind," Miller said, adding that the difference in gasoline prices between Iowa and California would be enough to cover the cost.

North Carolina resident Shirley Alpers waived rental insurance as she headed off to visit relatives in New Providence.

"I checked my auto policy and I was covered for it," Alpers said.

"That was a few years ago, but I don't think it's changed.

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