Should I buy rental car insurance from the rental company is a common question we get asked. However, understanding what is covered by your existing insurance policy and what isn’t can help you avoid surprises if an accident or damage occurs. In Pennsylvania and other states, your personal and commercial insurance policies have different rules regarding coverage when renting a vehicle. This blog will explain the coverage differences for rental vehicles, clarify what is typically covered and not covered, and provide some important considerations.
Personal Insurance Coverage for Rental Cars
If you have a personal auto policy in Pennsylvania that includes liability and physical damage coverage, this coverage will usually extend to a rental car. Here’s a breakdown of what’s typically covered:
- Liability Coverage: This covers bodily injury or property damage you may cause to others while driving the rental vehicle.
- Physical Damage Coverage: This will generally cover the cost to repair or replace the rental vehicle if it’s damaged in an accident, up to your policy’s limits.
However, two common items are not covered by most personal auto insurance policies in Pennsylvania:
- Diminished Value: This is the reduction in the car’s resale value due to the damage history, even after repairs. Rental companies may charge you for this, but it’s generally not covered by personal auto insurance.
- Loss of Use: This is the rental company’s lost revenue while the vehicle is being repaired. Most auto insurance policies do not cover these fees.
Some credit cards may offer additional protection for these uncovered items if you use the card to rent the vehicle. It’s important to check with your credit card company beforehand to understand any additional protection they may provide.
The Insurance Information Institute wrote an article you can reference for additional information about rental car insurance coverage.
Commercial Insurance Coverage for Rental Vehicles
In Pennsylvania, commercial auto insurance does not automatically cover rental vehicles. To ensure coverage when renting a vehicle for business purposes, you need to add specific coverages to your policy:
- Hired Auto Liability Coverage: This add-on provides liability protection for the business entity if you or an employee causes bodily injury or property damage while operating a rental vehicle for business use.
- Hired Auto Physical Damage Coverage: This provides coverage for damages to the rental vehicle itself. It’s important to note that hired auto physical damage coverage has a limit, which should be high enough to cover the value of the vehicle you’re renting.
Like personal auto insurance, commercial policies in Pennsylvania typically exclude coverage for diminished value and loss of use fees. Therefore, if the rental company tries to recover these costs, they may fall on the business unless you have supplemental coverage through a credit card.
Here is another article on rental car insurance coverage written by the National Association of Insurance Commissioners.
Additional Considerations When Renting a Vehicle
Whether for personal or commercial use, it’s essential to know the following when renting a vehicle:
- Where You Are Renting a Vehicle: If you are renting a vehicle in another country, you a probably not covered by your car insurance policy. Also, different states have different rules for auto insurance and for rental companies.
- Understand Rental Company Coverage Options: Rental companies often offer their own damage waivers and insurance policies, which may include loss of use and diminished value coverage. While these can be an added expense, they can also provide peace of mind if your primary insurance and credit card coverage don’t cover these items. It can also save your vacation if you have an accident because you will not have to deal with your insurance carrier and the claim will not show up on your insurance.
- Check Your Credit Card Benefits: Some credit cards provide additional coverage for things not covered by auto insurance, like diminished value and loss of use. However, this is only applicable if you use the card to rent the vehicle, so make sure to review your card’s terms and conditions.
- Verify Your Policy Limits: Especially for commercial insurance, make sure the hired auto physical damage coverage limit is high enough to cover the full value of the rental vehicle. Some luxury or specialty rentals may require additional coverage.
When renting a car, it’s crucial to understand the nuances of your auto insurance coverage. For personal auto policies, liability and physical damage coverage generally extend to rental vehicles, but diminished value and loss of use are typically excluded. For commercial policies, coverage is not automatic; hired auto liability and physical damage coverage must be added to protect rented vehicles.
Often times the best option is to purchase the insurance from the car rental company. This will secure you are covered for accidents in the rental car. It will should keep any claims off of your insurance which will help keep your rates low. Finally, it will allow you to enjoy your vacation because you will not have to deal with your insurance carrier. You will turn the claim into the rental car company and get another vehicle.
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Disclaimer: This blog provides general information, but insurance policies can vary by provider. Always review your specific policy details or consult with your insurance agent to confirm your coverage.