Rental Car Insurance 101 – Part 1
As anyone who has ever rented a car knows, there are a dizzying array of insurance options offered by the rental car company. Many credit cards, personal insurance policies and commercial insurance policies also offer coverage in some form or another. This can be very difficult to understand, so this three-part blog post will introduce the various types of insurance coverage applicable to rental cars in part 1, part 2 will cover options for physical damage to rental vehicles, and part 3 will cover options for third party liability and personal injury.
Generally speaking, when you rent a car the rental agency provides the minimum amount of third party liability coverage (insurance for damage done to third parties, such as other vehicles or pedestrians) as required by provincial/state law. However, this legal requirement is very low in most states. For example, California only requires drivers to carry Bodily Injury coverage of $15,000 per person / $30,000 per accident and Physical Damage coverage of $5,000 per accident. This is far below the actual amount of insurance needed even for a moderate collision. Any amounts above these minimums are legally the responsibility of the driver and/or vehicle owner, and can quickly turn into millions of dollars. However, there are a number of ways to reduce your legal liability.
Firstly, there are the optional coverages offered by the rental car company. Most rental car companies offer four types of insurance as follows:
Collision Damage Waiver or Loss Damage Waiver (CDW or LDW): This coverage provides coverage for loss of or physical damage to the rental car itself, regardless of who is at fault. It often comes with a $0 deductible too, so if there is an incident and you have this coverage, you can effectively turn the damaged car back in and walk away without incurring any additional costs. CDW/LDW does not provide coverage for damage/injury to the occupants of the vehicle or their property, nor does it cover damage/injury third party people or property.
Supplemental Liability Insurance (SLI): This provides additional third party liability coverage over and above the negligible base amount provided as part of the rental. The additional limit provided is typically a combined limit of $1,000,000 for third party bodily injury and property damage over and above the base limit provided.
Personal Accident Insurance: As compared to SLI, which covers injury to others, this coverage provides medical and death benefits coverage for injuries to the driver and passengers in the rental vehicle.
Personal Effects Coverage: Similar to Personal Accident, Personal Effects covers damage to the personal property of the renter and their passengers if that property is damaged/destroyed in a loss involving the rental car.
Although these all seem like a good way to protect yourself and your passengers for injury, loss and legal liability, many of these coverages are something you likely already have in other types of insurance. In part 2 of this series (LINK), we will examine how you can leverage your existing insurance policies to cover these risks and avoid paying $30-$40 per day for additional coverage from the rental car company.
Fuse Insurance Ltd. is proud to be a pioneer in the online commercial insurance market. We are the first online commercial insurance brokerage based in Western Canada, and we offer a complete range of insurance products for businesses of all sizes. For further information or to get a quote for your business, please see our website at www.fuseinsurance.ca or call us at 1-866-387-FUSE (3873) for more details.
