It’s one of the most common questions we receive here at Insurance Professionals of Arizona. When our client is traveling and needs to rent a vehicle, should they purchase the extra insurance offered from the rental car company?

The answer isn’t always readily available. Essentially, it depends on the auto insurance you currently have.

Many of the top tier insurance carriers will extend coverage to a rental vehicle if that rental vehicle is being used as a temporary replacement for your personal daily driver. There can be exceptions to this however, so you need to speak with a professional before making a decision. When we say they will extend coverage, keep in mind that means the same coverage you have on your personal insurance coverage; so, while liability and physical damage coverage may extend there are other coverages you may not have that the rental car company will seek compensation from you for. These two coverages are diminished value and loss of use coverage.

Diminished value amount is explained as a car that has been in a major accident generally has less resale value than the same vehicle in pre-crash condition. Even if the car repairs meet the highest quality standards, potential buyers are unwilling to pay as much for a car they know has been previously damaged. For example, your pre-crash vehicle may be worth $50,000 but your post-crash vehicle, even after repairs may only be worth $42,000 because someone is willing to pay less for it knowing it was in a crash. The difference between these amounts is known as diminished value.

Loss of use is the amount of money the rental car company would lose out on in rental income while the vehicle is not in operation. For example, the car is in the shop being repaired for 30 days. The rental car company could have rented it for $50 a day for those 30 days. That is $1,500 in lost income because the car was unusable, and they could not charge rents. You could be responsible for loss of use as well.

Before you buy anything, check your existing policy.

Generally, rental car company insurance policies, which are offered to renters at an additional cost, tend to include multiple types of coverage, but almost always includes a collision damage waiver (CDW) and liability insurance in case of an accident.

In many cases, your personal auto insurance may extend this coverage to your rental car, at least for liability and collision damage. However, don’t assume. If you can’t find the information about car rentals in your policy, give your insurance provider a call. Or if you are a client of IPA, give us a call so we can check for you.

If your personal insurance does not cover rental cars, it is recommended to purchase the rental car company’s insurance to ensure you’re protected. Should you get into an accident without coverage – even if you are not at fault – it can be extremely costly for you. This is especially true if there is a fatality or medical expenses related to the accident.

However, don’t simply take the rental car agent’s word for it – have them go over their insurance policy in detail and don’t be afraid to ask questions. Never pay for anything unless you know exactly what kind of coverage you are getting, and if it fully covers you in case of an accident.

Do you have any additional coverage already as a benefit?

Some credit card companies or financial institutions offer insurance coverage as a benefit, usually if you meet a certain spending threshold. American Express, for example, tends to market their services for frequent travelers and may offer extended coverage for your rental vehicle.

However, again, don’t assume. Make sure you know exactly what the company is offering as a reward and read the fine print. The last thing you want to do is head out on the road believing you have coverage you don’t have.

Know before you go!

No matter what, it is always better to consult your insurance company, or give us a call at Insurance Professionals of Arizona prior to leaving on your trip. That way there is enough time for us, or for your insurance company, to take a good look at your policy and fully explain exactly what kind of coverage you already have. And also, what – if any – extra coverage you may need to purchase at the rental car agency.

Oftentimes, calling IPA or your insurance company while you are at the rental car counter may not give you enough time to know for sure. Especially if your insurance provider doesn’t pick up the phone or has a long wait time.

So, give IPA a call before you head out. It could save you some money at the rental car counter or save you some out of pocket expenses should you get into an accident while on your trip. At the very last hopefully it will save you some worry wondering if you have coverage.