Car Insurance and Rental Cars: Everything You Need to Know

You’re probably renting a vehicle for one of two reasons, and they couldn’t be more different. One, you are planning a trip and want to rent a vehicle to travel. Or, the not-so-fun reason, you were in a car accident and your vehicle is in the shop for repairs.

Both of these situations prompt the question: Does my car insurance cover rental cars?

The answer: If you have car insurance, most insurance companies will extend coverage to your rental vehicle. But, the amount of coverage they will extend is what you need to figure out. We recommend calling us at Ridpath Insurance, your local, independent insurance agent or your insurance company to examine your policy.

But, we get it. You have questions because insurance can be confusing.

So, here are our answers to common questions about rental cars and car insurance:

1. Does my car insurance cover a rental car to travel?

If you’re traveling and need a car, your car insurance will most likely extend to the rented vehicle. But, each insurance company does this differently. At Auto-Owners, we extend the most extensive coverage you have on any personal vehicle on your policy, within our coverage territory (U.S., Canada, and Mexico). Although, if you’re traveling to Mexico, you will want to read more about how their government may not recognize your insurance in section three, below.

For example, let’s say you rent a vehicle to go on a weekend trip. The coverage that extends to your rental is the same as your vehicle with the most coverage on your policy. So, if you have a vehicle on your car insurance with collision coverage, then collision coverage will extend to your rented vehicle. If you don’t have collision coverage on any vehicle on your policy, then collision coverage will not extend to your rental vehicle.

Again, the best way to be sure is to call us at Ridpath Insurance or whoever services your policy. As your local, independent agent we make asking questions like this as easy as making a quick phone call.

2. Do I need extra insurance when renting a car to travel?

If you have car insurance, most insurance companies will extend coverage to your rental vehicle. But, when you get to the car rental counter you will most likely be presented with extra protection options. Sometimes these overlap with your existing personal car insurance coverages. This means you could potentially pay for the same thing twice. Yuck!

To get a better idea of how your existing auto insurance policy compares with the car rental protection plans, check out our table below. (Remember, these will differ depending on your insurance and the car rental company.)

• If your auto insurance includes collision coverage and comprehensive coverage, you may already have coverage for this.
  • For Auto-Owners policies, if you have a vehicle with collision and comprehensive coverage, we extend it to your rented vehicle, as long as you are traveling within the coverage territory. This means you have coverage and shouldn’t need the damage waiver.

• Most car insurance policies include a medical payments coverage, which pays for qualified medical expenses for you and the passengers in your vehicle involved in the accident.
• However, check the limits you selected for your policy. If your medical payments coverage limits are low, you may want to consider adding this coverage.

• Your car or homeowners/renters insurance may cover this. Depending on the items, you may already have coverage if your belongings are damaged in your rental vehicle.

• Most car insurance policies include liability coverage, but when you purchase your policy, you choose a limit. If you selected a low limit, you may want to consider paying for the rental company’s supplemental liability protection.

So, here’s the alarming part. Sometimes, despite all these options, there may still be gaps in your insurance for a rental vehicle.

Auto-Owners offers three endorsements to avoid these gaps and hidden fees:

• Rented Automobile Replacement: Some car rental companies specify in their agreements that if you total one of their vehicles it must be replaced with a new vehicle. This endorsement will replace the rented vehicle with a new one. Otherwise, you could be on the hook for replacing it.
  • For Auto-Owners policies, this endorsement is included if you have comprehensive and collision coverage!

• Loss of Use – Rental Fee Reimbursement: If you damage your rental vehicle the rental agreement may require you to continue paying the daily or weekly rental fee. This endorsement will pay the fee that would have been paid if the rental vehicle had not sustained damage.
  • For Auto-Owners policies, this endorsement is also included if you have comprehensive and collision coverage!

• • • If the company repairs it, they may charge you for a perceived loss in value, since the vehicle is now damaged and therefore worth less. Alternatively, if they sell the vehicle after repairing it, they may charge you for diminished value. Diminished value is the difference in the vehicle’s value before the damage and the amount the rental company was able to sell the vehicle. This endorsement covers the amount of diminished value, or perceived loss in value, so you’re not caught with that bill.Rental Gap:  If you are in an accident in your rental vehicle, the rental car company may handle repairing or selling the vehicle in a few different ways. Some of them can leave you paying for a perceived loss in value or diminished value.
  • For Auto-Owners policies, this endorsement is included if you have the Personal Automobile Plus Package.

3. Will I have coverage if I travel out of the country?

Generally speaking, you can travel to Canada, the U.S. and its territories/possessions and your car insurance will still extend to your rental vehicle.

However, if you travel to Mexico, you will probably want to buy Mexican car insurance. Even if your car insurance policy states that it extends to Mexico, the Mexican government does not recognize U.S. car insurance. So, your insurance company may be able to pay for covered damages if you’re in an accident, but the Mexican government may still not recognize your insurance. Meaning, if you are pulled over by the police, you could be fined and penalized for not having insurance.

If you are planning a trip to Europe, you will likely need to purchase rental car insurance. To be sure, check your insurance company’s coverage territories. Auto-Owners does not extend coverage to Europe.

For many U.S.-based insurance companies, if you travel overseas, your car insurance will not apply to a rental vehicle. This means you will probably want to purchase insurance from the car rental company.

4. What questions should I ask my agent or insurance company to determine if I have rental coverage?

1. Does my current auto policy include collision coverage?
2. Does my current auto policy include comprehensive coverage?
3. What liability limits are set on my policy? Do you recommend I buy supplemental liability coverage from the car rental company?
4. Do I have coverage for my own medical expenses if I am injured in an accident?
5. Does my homeowners or renters insurance protect items in my rental car if they are stolen or damaged? Or, does my car insurance protect items in my rental vehicle?
6. How does my insurance company extend my coverages to rental vehicles?
   • Auto-Owners extends the coverage of the vehicle with the most coverage on your policy, as long as you are traveling within the coverage territory.
7. Are there any additional endorsements or add-ons I should consider for my trip in a rental vehicle to avoid coverage gaps and hidden fees? For Auto-Owners policies, additional endorsements are included if you have comprehensive and collision coverage.
   • Examples of additional coverages to inquire about are:
     • Rented vehicle replacement in the event of an accident that totals the vehicle
     • Reimbursement of rental fees in the event your rented vehicle is damaged
     • Rental automobile gap coverage for diminished value or perceived loss of value after an accident

5. What if somebody else drives my rental car?

If you include somebody that’s not on your car insurance policy on the rental agreement, things get more complex. This is because their insurance coverage for rentals may be different. If you are involved in an accident, and they are the driver, it will likely be their insurance coverage that applies.

So, even if you do your homework, if your friend is also on the agreement, and has insurance that doesn’t cover all these situations, you may find yourself underinsured.

6. What types of rental vehicles will my insurance cover?

Most insurance will extend coverage to certain types or sizes of vehicles. So, again check with your independent agent or insurance company to see how your coverage compares. For Auto-Owners policies, we extend coverage to rental vehicles that weigh 26,000 pounds or less. This generally includes most cars, SUVs, trucks and even some rental moving vehicles.

7. Does my car insurance cover a rental car to replace my damaged vehicle while it’s being repaired?

Broadly speaking, most car insurance policies include some sort of coverage for a rental while your vehicle is being repaired.

Our auto insurance policies specify that if you are renting a vehicle as a replacement, the coverages for the vehicle it is replacing apply.

Meaning, if the vehicle that is having repairs only has liability coverage; then only liability coverage will extend to your rental. If you have collision and liability coverage on that vehicle, then your rented vehicle will also have collision and liability coverage. You get the idea.

Again, not all insurance companies handle rentals the same, so it’s a good idea to ask how your car insurance extends to rentals.

Disclaimer: The analysis of coverage is in general terms and is superseded in all respects by the Insuring Agreements, Endorsements, Exclusions, Terms and Conditions of the Policy. Some of the coverage mentioned in this material may not be applicable in all states or may have to be modified to conform to applicable state law. Some coverages may have been eliminated or modified since the publishing of this material. Please check with your local Independent Auto-Owners Insurance Agent for details.