Have you ever rented a vehicle and found yourself being asked by the car rental agent, “Would you like to purchase our physical damage insurance?” If you’re like most people, you ask how much their insurance will cost and then upon hearing the daily insurance fee, you decide against it and hope for the best. This could be a mistake.
Let’s take a look at the differences between a Personal Auto Policy (PAP) and the typical insurance coverage offered by a rental car agency. First, the loss valuation on most PAP’s is actual cash valued (which is replacement cost less depreciation) or the cost of repair, whichever is less. The rental car agreement often requires reimbursement of the full value of the car – leaving you on the hook for the difference, which could be quite substantial.
The coverage area provided by most PAP’s is limited to the United States, Puerto Rico and Canada while the rental car insurance agreement would cover the rental vehicle in the territory it is rented. For example, the rental insurance agreement for the car you rent in Europe would cover it while you were in Europe, your PAP would not.
In the event of damage to a rental vehicle, the PAP typically requires an appraisal of the damage be performed prior to repairs being made. Let’s say you return a damaged rental car to the rental company, they will probably make quick repairs before your insurance company has the chance to appraise the damage. The PAP could then deny the claim since an appraisal was not done – leaving you financially responsible. The rental company may also pass additional costs on to you such as towing, storage and the income they have lost from not being able to rent the vehicle until it is repaired.
So, the next time you are planning to rent a vehicle, call your agent beforehand to go over the specific terms of your PAP as it relates to rentals. Each company is different, and not all personal auto policies are exactly the same. You may find the additional expense to purchase coverage from the rental company is your best bet.
Securities and insurance products are offered through Univest Investments, Inc., member FINRA/SIPC and a licensed insurance agency. Investment advisory services are offered through Girard Partners, a Univest Wealth Management Firm. These affiliated companies are licensed subsidiaries of Univest Corporation of Pennsylvania. Products and services offered are not FDIC insured, are not a deposit of or bank guaranteed, and are subject to risks, including possible loss of any principal amount invested.