Jerry Seinfeld to rental car agent:
“Yeah, You better give me the insurance because I am going to beat the hell out of this thing”
From the Seinfeld Episode: The Alternate Side, Season 3, Episode 11
For many years, I used to recommend that our clients could safely rent a car with the knowledge that they had pretty much the same coverage as if they sat in their car with coverage from their own insurance policy.
About ten years ago, I had to change my tune. Now, I’m really singing it.
What happened?
The Rental Car Contract. (for those of you renting a U-Haul, please see update later in this post)
The rental car company (Rental) decided that there was another revenue stream for them in the form of Collision Damage Waiver (CDW) insurance. It has other names depending on the company, but it means if there is damage to their car, you’re going to pay for it, unless you have their CDW.
Here are some examples of the dangers you face.
You’re on vacation and you cause damage to their car. They decide that the damage is $4,000. They take $4,000 out of your credit card right now. Will that do anything to the rest of your trip? A $4,000 unplanned hit to your credit card limit will affect a lot of us.
What if you say, “The damage can’t be more than $2,000”. Their repair guys always cost more than your repair guys. And their guys rule. Why? The contract says so.
If the Rental charges $4,000 and your insurance company decides that $2,000 is really the fair cost of repair in the area you had the accident, you will have $2,000 shortage. Even worse, your company could deny the claim. Your insurance policy has a requirement that the company be able to inspect and appraise the damaged property “before its repair or disposal”. The Rental often will not wait for this to happen. Why? The contract says so and they have your credit card hostage.
Indirect losses are potentially big disasters waiting to happen. The Rental will claim loss of rental income if their car is out of service due to your damage. You have limited or no coverage depending on your policy. Another indirect loss is diminished value. This is where Rental says their car is worth less because of the accident. The diminished value is charged to you because Rental’s contract says they can. They may also charge administrative fees and neither these fees nor the diminished value are covered by most policies.
Rental’s contract will make you responsible for many things that are not covered by ANY insurance policy. Remember, when you sign the contract you agree to ALL these things. Like, fines, penalties, costs and others. Your policy covers liability for Bodily Injury and Property Damage, not everything. You will almost certainly see the word “indemnification”. This means you get to pay them back for anything they lose money on and you usually will get to pay their attorney’s fees also. Not a pretty sight.
Ever let your car be valet parked? Don’t do it again. Your Rental contract will be void if you let someone other than those on the rental contract operate the car. Usually, even the CDW insurance you paid for will be voided for this.
What about coverage from your credit card? Some cards do have some coverage, but all of them have restrictions. To get any coverage from your card, you have to decline the Rental’s CDW insurance. A very dangerous choice. I looked at my best credit card’s coverage and the limitations on it are very scary and there are lots of them. Do you have a full-size sport utility vehicle (whatever that means)? Don’t expect coverage. All I can say is that the credit card company’s coverage is free.
Rental car insurance issues have turned many a person’s dream vacation into a financial nightmare. Don’t let it happen to you. Buy the outrageously priced rental car company collision damage waiver insurance. When you’re done, just give the keys to the counter rep and smile all the way home. Like Jerry.
If you want to see The Car Reservation clip from this very funny Seinfeld episode, you can find it here.
https://www.youtube.com/watch?v=4T2GmGSNvaM
U-Haul and other truck renters continue reading
Just like their automobile cousins, trucks present the same dangers as outlined above. I recently rented one to move my daughter. The cost of the 1 day CDW was $56. No one likes spending money on something you can’t eat or consume, but anything can happen when driving an unfamiliar vehicle. Remember, even if the damage is not your fault, IT’S YOUR FAULT! Why? Because the rental agreement you signed says so.
Another real danger here is that the truck you rent is too large to fit in your insurance policy. Three of the five companies I reviewed indicated that a covered auto included a pickup or van and a truck with a Gross Vehicle Weight (GVW) of 12,000 pounds or less. One company used 15,000 GVW as their limit and one indicated that a pickup or van was covered, but did not mention the word “truck”.
When you look at U-Haul’s website, you see a pickup, van and 5 truck options. A nice selection for those moving stuff. When looking at the GVW of each truck, one is under 12,000, three are 14,000 and one is 22,000. The 22,000 GVW exceeds the limit of all five policies.
These GVW restrictions are going to apply to the injuries you cause to others or damage to others property (not the rental truck). So it is highly recommended that you just forget about the GVW and buy the liability insurance from the truck renter.
Remember, even if your truck fits in one of the above slots for damages you do to others or their property, it does not protect you for the damage you do to the truck.
A final note for movers. Don’t forget your “stuff” that you are moving. If the truck catches on fire, is stolen or you roll it, your stuff won’t be pretty anymore. The good news is that you may have some coverage from your renters or homeowner’s policy on your residence. If covered, it is covered as if it is in your home. Everything is not covered. Some policies do not cover your stuff away from your home, so check with your agent.