Rental-car insurance

Rental-car insurance can be confusing, costly

As a retired financial adviser, Susan Edwards feels pretty comfortable about most money questions.

But she admits to being stumped recently when she got to a car-rental counter at Sky Harbor International Airport and the agent asked if she wanted to purchase insurance on the car.

Edwards, who lives in Phoenix but needed a rental while her own vehicle was in the shop, decided to buy one of the insurance options. The clincher came when the agent at the counter pointed out that her personal auto policy might not cover "loss of use," which refers to possible lost revenue for the rental-car company while a damaged vehicle is being repaired.

The coverage wasn't cheap. "I was paying $22 a day for the car and $16 a day for the insurance," said Edwards, who returned the vehicle with no damage but continued to wonder whether she was right to buy extra coverage.

Many travelers struggle with the same question. In a survey by the National Association of Insurance Commissioners, 42 percent of consumers said they were "thoroughly confused" or had only a rough idea of what their personal auto policies covered when it came to rental cars. A survey by Progressive found widespread ignorance about optional rental-car insurance.

Regular policies that people carry for their own vehicles do provide a lot of protection on rental cars. But specifics vary, so it's important to read the fine print or check with your agent.

According to the Arizona Insurance Council, personal auto policies generally cover expenses, less deductibles, arising from the theft or vandalism of a rental vehicle. If you cause an accident, your personal liability insurance likely would pay for damages and medical expenses. Many personal auto policies cover loss of use on rental vehicles if sidelined more than 24 hours, but they limit reimbursement to a reasonable amount of time for repairs to be made. Larger insurers are more likely to offer protection. If you buy insurance from a rental-car company, that coverage kicks in first.

Beyond that, you typically can get extra protection if you charge the transaction with a credit card. "In most cases, these benefits are secondary to your personal auto insurance or the car rental company's insurance, meaning the credit-card company will only pay claims after other insurance coverage has been exhausted," states the NAIC.

Credit-card protection typically covers collision damage or theft of a vehicle, along with loss of use, reasonable towing charges and administrative costs. It doesn't cover injuries, personal liability, damage to property other than the vehicle or the loss or theft of belongings.

But loss-of-use coverage is hazy. Credit cards typically pay for this but often only if the rental-car company provides verification that other vehicles weren't available for lease, and rental firms often won't divulge that information, according to CreditCards.com.

It's worth noting that loss of use is a low-dollar risk compared with other driving perils. On the other hand, there's something to be said for keeping your travels as hassle-free as possible, especially if you're in another country.

Incidentally, rental-car coverage is one reason Consumer Reports' ShopSmart magazine recommends using credit rather than debit cards on trips. Other reasons include the travel insurance and concierge assistance that cards provide. Plus, it's often easier to dispute questionable credit charges, and your liability for unauthorized purchases, just $50 maximum on credit, is lower than with debit.

To access credit-card coverage on rental cars, you typically need to pay for the transaction with your card, be the primary renter of the vehicle and decline the collision-damage or loss-damage waiver offered by the rental company.

There are other wrinkles, too. Credit-card coverage generally doesn't apply on vehicles rented in a handful of foreign locales -- notably Jamaica, Israel, Ireland and northern Ireland. Nor does it cover long-term rentals. Visa, for example, covers up to 15 days on domestic rentals or 31 days outside the country. In addition, protection often doesn't extend to rare or particularly expensive vehicles. And be forewarned: Reckless or unwise driving, including off-road use or driving while intoxicated, invalidates the coverage.

If you don't have a personal auto policy, opting for rental-car coverage is wise. Otherwise, the decision isn't always clear-cut, so check the coverage you already have, on personal auto policies and credit-card accounts, before leaving home.