Our clients most frequently ask whether they should purchase additional insurance from a rental company when renting a car.

Our recommendation is a resounding yes for the physical damage or loss damage waiver. Admittedly this isn’t always a welcome response as it typically costs an extra $20 – $40 a day for this coverage.

Why do we recommend purchasing this additional coverage?

While your auto insurance policy will cover a private passenger rental car the same as your vehicle (within the U.S. and Canada), within the fine print of most rental contracts are potential additional charges your insurance policy would not cover, including:

  • Lost Rent: An expense charged for the daily rental cost for every day a rental car is out of service following an accident.
  • Diminished Value: As cars generally decrease in value when damaged in an accident, many rental companies will assess a fee based on the estimated decrease in value. Based on recent incidents, many rental companies estimate the reduction at 10% of the cost to repair – meaning a $5,000 repair cost would equate to a $500 charge for diminished value.
  • Towing: Even if you have towing coverage, expenses may exceed your coverage limit, especially if the rental company requires towing to a specific facility rather than a nearby body shop.
  • Administrative Expense: An additional charge to account for the rental company’s time and effort in having their vehicle repaired.

While the cost of additional insurance when renting a car is definitely in the column of nuisance expense, it can save you considerably if you happen to have an accident.

It’s worth noting any coverage from a personal auto policy generally will not extend to a different type of vehicle, such as a utility vehicle (U-Haul truck) or motorhome.

Did you know?

If you rent a vehicle, even if your insurance covers repair costs resulting from an accident, the rental company may put a hold on your credit card until they receive payment!