Rental Car Insurance Alternatives

Few months ago, I was given a rental car by the car insurance company because my car was totaled due to an accident. In a situation where somebody pays for your rental, they do NOT typically pay for any collision damage waiver (CDW) or comprehensive coverage. Because I was carrying only the liability coverage on my car insurance policy and also because I just had an accident, I thought to get collision damage waiver coverage on my own.

If you don't know what CDW means, it is a coverage where if your rental car gets damaged due to an accident or stolen, your rental insurance pays money to repair or replace that car, up to a limit. If you get CDW coverage from the rental car company, then after an accident, you simply return the keys and walk away. If you choose to get CDW through some other means, then you will need to do some paperwork and go through the claims process, but it is still better than not getting any coverage at all. With rental car company, the process is very simple, but the coverage is costly. So, there is a tradeoff between convenience and cost.

In my own case, I chose NOT to get CDW from the rental car company. They were charging $24.95/day which is far more expensive. Since my rental car was for 3 weeks period, I knew that this was an expensive proposition. To save money, I looked around and did some research on alternative ways to get this coverage.Luckily, there are multiple ways to get CDW. In this blog post, I will review those, along with pros and cons.

Credit Card Company

Both Visa and MasterCard offers CDW coverage for free of cost if you use their cards while renting your car. Generally, these cards pay for covered damages (physical damage and theft) to a rental vehicle when your eligible credit card is used to initiate and pay for the entire rental transaction. The drawback of this method is that this coverage becomes your secondary insurance. You will have claim the damage with your car (regular) insurance first. Any amount not paid by your primary insurance is then paid by this secondary coverage. In short, you will have to go through multiple hoops to make this work. Personally, I have never claimed any damage to a credit card company, so I am not sure how good such "freebie" coverages are.

American Express (AMEX) Premium Rental Car Coverage

If you have an AMEX card, you can enroll in their Premium Rental Car Coverage program. Every time you rent a car using this AMEX card after your enrollment, then they will automatically charge you $24.95 flat-rate amount for the entire duration of your rental period for up to 42 days. They will cover your damage or theft for up to $100,000, which is a very high amount. This coverage becomes your primary coverage. Because this coverage is primary coverage, it saves you hassles of dealing with your own car insurance company and also aoviding any premium increases for your regular insurance in the event of a claim. This is a pretty good option for those who have AMEX and are renting cars for a week or longer.

3rd Party Coverage through Orbitz

Orbitz also offers 3rd party coverage for $9.99/day. This policy covers physical damage to a rental car, up to a maximum of $40,000, which is caused by a collision, fire, storm, vandalism or theft and occurs during the rental period (maximum 45 days). It also includes a 24-Hour Help Hotline. This coverage can be added by choosing the option 'Add Rental Car Coverage' on the 'Review and complete reservation' page displayed during the booking process. If you have already booked your car reservation, then you can add Rental Car Protector go to the "Customer Support" tab and click "Travel Protection" box on the right of your screen. Once Rental Car Protector is booked and confirmed, Allianz Global Assistance, Orbitz' insurance partner, will email a confirmation that includes details of the trip, coverage and the policy number.

3rd Party Coverage through ProtectYourBubble.com

Protect Your Bubble is a fairly new entrant in this space. They are a very popular travel insurance company in the UK. With this method, you can get your coverage for ONLY $7.95/day. It covers damage to the vehicle as well as theft of the vehicle up to $35,000. Also, you can cover multiple drivers on the same policy and includes free 24-hour roadside assistance. This becomes your primary insurance. In my case, I used this coverage to save money, but still get the peace of mind.

Notes on Loss of Use

When your rental car gets damaged, the rental car is essentially not available for the rental car company to rent it out to customers. Therefore, the rental car company loses money while the the car sits in the repair shop. Therefore, rental car company will send you the bill for "Loss of Use" and "Administrative Cost" if you decline the CDW coverage from the rental car company. You will NOT receive this bill when you choose to get CDW from the rental car company. Also, most 3rd party rental insurance (including AMEX) will require log for the days car sits in the repair shop. Rental car companies typically refuse to provide such records because they are not obligated to provide you and nor is it legally required. This is one of the downside of going the 3rd party route because there is a risk that rental car company may charge more than reasonable charges and your 3rd party insurance company may not reimburse you for loss of use because you may not be able to product the rental logs from the rental car company.

Conclusion

If you have an AMEX card and are renting a car for 3 or more days, then AMEX Premium Rental Car Covergage is a great deal. But, if you are renting for a day or two, then go for rental car company's coverage because it is hassle-free. If your travel is straightforward and stress-free, then get it through Protect Your Bubble or Orbitz.

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