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With Memorial Day just around the corner and summer vacation not far behind, you may be planning an out-of-state trip with friends and family. If you intend to rent a vehicle for your trip, do you know how you'll be insured? And just as importantly, do you know who will be insured?
Last month, a District Court in Florida ruled that Allstate Insurance Company was not liable for the damages incurred when a car rented by one of the company's policyholders collided with another vehicle, killing a passenger. According to a report published by FC&S Legal, Marlene D. Harmon rented the vehicle from Enterprise. As an Allstate policyholder, Harmon's personal liability coverage extended to rental vehicles and any spouse or family member living in her home (resident relative) who drove that rental vehicle.
However, her insurance coverage excluded instances when she allowed an unrelated person to drive a nonowned car. This meant Steven Bruce Waldman, who was driving the rental vehicle at the time of the accident, was uninsured—even though he was a listed driver on Harmon's personal auto insurance policy's declaration page.
Policyholders regularly list additional drivers, such as a licensed family member, on their auto insurance policies. Listing regular drivers helps insurance companies appropriately set your insurance rates. However, it doesn't necessarily add that driver as an official policyholder. Since Waldman was not a policyholder, legal spouse or relative of Harmon's, her Allstate policy did not apply.
Fatal accidents are always a tragedy, but finding yourself uninsured when you thought you were only compounds that nightmare. With Memorial Day weekend being one of the most dangerous weekends to drive, vacationers who will be renting vehicles need to double check how they're insured and who is eligible to drive before taking to the road.
Are rental cars covered by my personal policy?
If you already carry an auto insurance policy, it may provide the same level of insurance to any vehicle you rent, allowing you to decline the coverage sold at the rental counter. For example, if your personal policy includes collision and comprehensive coverage, it might also cover damage to your rental vehicle if you cause an accident or if someone vandalizes your rental car. Likewise, personal property that is stolen from your rental car might be covered if you already carry a homeowners or renters insurance policy.
However, you should never assume that you're insured. Some personal policies automatically cover rental vehicles, while others may require you to add a rental car rider to your policy. Contact your auto insurance agent and ask them to explain exactly how you're covered if you decline the insurance package offered at the rental counter.
Who is insured to drive under my auto insurance policy?
In addition to determining whether you're covered when driving a rental, you should ask your agent who is insured to drive your rental vehicle. Most auto insurance policies provide coverage for instances when you loan your insured vehicle to someone else for a short period of time. However, in the incident above, Harmon's policy excluded instances where a nonowned vehicle was being driven by someone other than the policyholder or her resident relative.
This difference in the treatment of nonowned (or rented) vehicles should stand as a warning to policyholders. If you're going on a road trip with friends, don't assume anyone other than the person who rented the vehicle is insured to drive, even if they live at the same address. If an uninsured driver causes an accident in your rental car, you could be held responsible for all vehicle damage plus the loss of use of it while it's being repaired, since your name is on the rental contract. Additionally, either you or the person who caused the accident could face lawsuits from the victims of the collision without any liability insurance to protect you.
Contact your insurance company and ask specifically who is able to drive a vehicle rented in your name.
Am I already covered by my credit card?
Certain credit card issuers provide limited rental car coverage as a benefit of using their cards. To qualify for this coverage, the cardholder's name needs to match the name of the renter on the rental contract. Additionally, you need to pay for the full rental with that card.
However, this insurance typically only covers collision and comprehensive damage—damage done to the rental vehicle itself. Credit card car rental insurance typically does not include liability insurance, which would cover damage you do to someone else's property or any injuries they sustain in an accident. Similarly, it won't cover your own medical expenses or any personal property that may be stolen from your car.
If you don't already carry a personal auto insurance policy, it's important to understand that the coverage you receive from your credit card issuer will not be enough to satisfy your state's minimum required auto insurance.
When should I buy coverage at the rental desk?
There are at least four situations when renters should purchase the rental car insurance offered at the rental desk.
- The renter doesn't already carry an auto insurance policy.
- The renter's personal policy doesn't extend coverage to rental vehicles.
- The value of the rental substantially exceeds the limits of the renter's personal policy.
- The renter's personal policy doesn't extend coverage to one of the rental car drivers.
If any of the above applies to your group, you should purchase rental car insurance, either at the rental counter or through a private rental car insurance company, such as Allianz. Additionally, make sure every person who will be driving the vehicle is listed as a driver on your rental contract. You may have to pay a daily fee for each listed driver, but this added cost is negligible compared to the cost of paying for damage out of pocket.
The article, Renting a Car for Memorial Day Weekend? Double Check Who's Insured to Drive, originally appeared on ValuePenguin.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
