Anyone who has traveled out of town via plane knows the value of investing in a rental car. Rental cars can help you have access to reliable transportation while you are away from home.
When you pick up your rental car, the rental company will likely ask you if you want to purchase an insurance policy that covers the car for the duration of the rental period. Many drivers are tempted to forego this insurance to help cut costs, but doing so could end up costing you in the long run.
Liability vs. Physical Damage
The primary reason that most drivers opt not to invest in car insurance through a rental agency is because they assume their existing policy will automatically transfer to the rental car. This is only partially accurate.
There are two types of auto insurance coverage- liability and physical damage. Liability coverage provides coverage against damage you might cause to other people's cars or property when involved in an accident. Physical damage (sometimes referred to as full coverage) provides coverage for the vehicle that you are driving in the event of a collision.
Liability insurance will automatically transfer over to your rental car, but physical damage insurance applies only to the vehicle listed in your policy. This means that you will not be protected against the financial costs of repairing a rental car that sustains damage while you are driving unless you purchase additional insurance coverage through the rental agency.
Exceptions
As with most rules, there are exceptions to the limited coverage that extends from your own auto insurance policy to a rental car. The most common exception occurs when you are driving a rental car provided by your insurance company.
An insurance company will often issue a rental car to drivers who need to have their primary vehicles repaired following an accident. In these instances, the auto insurance company views the authorized rental car as a replacement for your primary insured vehicle. All insurance coverage listed on your policy will transfer to the rental car automatically.
Understanding the relationship between your existing auto insurance policy and rental cars can be difficult. It's important that you take the time to sit down with your auto insurance agent and discuss your insurance needs before you embark on a trip where a rental car will be required. This meeting will help you determine how to go about guaranteeing that your rental car is properly insured.
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