Should You Purchase Insurance When Renting a Car?—What Car Rental Companies Do Not Want You to Know
Although the concept of Uber or Lyft is highly popular these days, such services become unfeasible when dealing with long distances; the costs rack up exponentially when traveling day to day and especially from city to city. The same issues apply to renting a taxi cab. Thus, the alternative to using Uber or Lyft still reverts back to the status quo—renting a car.
When renting a car, many individuals are discouraged by the exorbitant fees associated with most rental companies. First, renting a car can be expensive in and of itself; depending on the type of vehicle, renting a car can cost more than $100 per day. Second, the rental company charges numerous fees ranging from customer facility charge to sales tax and even ownership tax. As a result, one may initially believe that he or she is getting a good deal; however, the total cost actually paid at the counter will most likely render that good deal a not-so-good deal. For example, depending on the state and the rental company, one who rents a compact car for $25.00 a day for four days can expect to pay approximately $37.00 in taxes and fees alone. These taxes and fees are greater than the daily rental fee for the car itself!
Third, for peace of mind, many individuals are then faced with the decision to purchase insurance from the rental company. Most rental companies generally offer four types of insurance: loss-damage waiver (waives financial liability if the rental car is damaged or stolen); liability coverage (meets the state’s minimum insurance coverage); personal accident insurance (covers medical costs associated with personal injury); and personal effects coverage (covers personal belongings in the rental car). The fees for such insurance coverage, depending on the coverage one chooses, range from $5.00 to $20.00 per day. Because loss-damage waiver insurance offers the most comprehensive coverage, one can expect to pay the highest amount of approximately $20.00 per day. This now adds at least $80.00 to the initial total of $137.00 for renting a compact car for four days.
To avoid this additional $80.00 fee, most individuals know they can decline insurance from the car rental company and use their own personal car insurance. Most personal car insurance will protect from personal liability as long as one drives the rental car for personal use. What most individuals are not aware of, however, are the additional outlets of protection offered by their credit card companies, health insurance, and homeowner’s insurance—at no additional cost! Many major credit card companies, such as Discover and MasterCard, automatically offer car rental insurance if one declines insurance coverage by the rental company. The respective credit card must actually be used to book the rental, and the credit card account holder must be the sole driver of the rental. An individual’s health insurance may also offer coverage for personal injuries in general, and thus, will pay for his/her injuries in the event of an accident. Further, one’s homeowner’s insurance may offer coverage for personal belongings stored in the car rental.
In all, as tempting as it is to purchase insurance from the car rental company, one should first consider other alternatives available at no extra cost.
Thanh Le is an associate attorney at Nguyen & Chen, LLP, whose practice focuses on litigation and corporate law. She obtained her Bachelor of Science in Biotechnology from the University of Houston and her Juris Doctor from South Texas College of Law, both with Magna Cum Laude honors. She is also fluent in Vietnamese and has spent her time volunteering at Houston Volunteer Lawyers, LegalLine, and Veterans Legal Clinic.