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Does american family car insurance cover rental cars

Youtube poop trains planes and car insuranceIncredible real estate deals in select buyer’s markets notwithstanding, there are plenty of advantages to renting over buying. In most cases, renters enjoy more flexibility and mobility; they also avoid responsibility for the maintenance, repair, and renovation projects in which homeowners (and landlords) are obligated to invest.

But renters do face one apparent disadvantage: They’re not eligible for homeowners insurance. However, thanks to renters insurance, this is no big deal, as it provides many of the benefits of homeowners insurance, including protection from personal liability and coverage for damaged, destroyed, or stolen possessions. For people who don’t own a home, renters insurance is the answer to homeowners insurance.

If you’re wondering whether your current living situation warrants renters insurance, it’s important to consider the benefits, drawbacks, and little-known facts.

Benefits of Renters Insurance

1. It’s Not Limited to Your Apartment’s Interior

When you hear the term “renters insurance,” you probably envision a policy that reimburses you for physical possessions that are lost, damaged, destroyed, or stolen within the confines of your apartment. This is certainly a key function of renters insurance, but it’s not all it entails. Virtually all renters who carry insurance hold a “content insurance policy” that covers (with some exceptions) your TV, stereo, computer, furniture, and other valuable items that stay in your rental unit. Content insurance also covers items that you keep in your car, provided that the vehicle is registered in your name and at your address. If your car is burglarized overnight, while you’re out of town, or during the course of a leisurely meal at your favorite restaurant, you may be reimbursed for the theft of any covered items within it.

Renters insurance also protects you from liability issues that may arise in the course of your tenancy. If a guest sustains an injury during a fall or as a result of some kind of accident at your home – such as a burn from hot cooking oil, or an electric shock – your renters insurance policy’s liability coverage may cover the cost of a potential lawsuit and/or the guest’s medical bills.

Likewise, your policy may cover the cost of fire or water damage sustained by other tenants in your building as a result of faulty plumbing, outdated wiring, leaky floorboards, and other hazards that originate in your unit. Finally, your policy should cover – or should at least provide you with the option to cover – temporary relocation and living expenses that you may incur in the event that your apartment becomes unlivable due to fire, flood, or structural damage.

2. It Can Be Bundled With Other Insurance Policies

Chances are good that your apartment isn’t the only thing you’d like to protect. For example, if you own a car, you’re legally obligated to carry insurance on it. These days, you’re also required to hold some type of health insurance policy. Depending on your age and family situation, you may have life insurance as well. And if you own particularly valuable items like precious jewelry or original artwork, you may need customized policies to cover them.

The good news is that renters insurance can be (and often is) bundled with other types of insurance at a significant discount. Virtually every major insurer offers a multi-policy discount, which is a premium discount for carrying more than one insurance policy with the same company. Since many renters also own cars, it’s especially popular for tenants to bundle rental policies with auto insurance policies. The discounts can be impressive: For instance, Esurance offers a 30% discount on bundled renter-auto policies. Other insurers offer similar discounts on a case-by-case basis.

3. It Offers Protection for Landlord Negligence

Here’s a scenario: You head home from work, looking forward to a relaxing evening of eating takeout and binge-watching Netflix. But as you approach your apartment building, you realize that something isn’t right. Fire trucks and cop cars surround the entrance, and a thin cloud of smoke rises from its roof.

Eventually, investigators determine that a decades-old circuit shorted out, triggering a chain reaction along some old faulty wiring that caused a fire on your floor. The building isn’t destroyed, but your apartment has been brutalized by smoke and heat. Your electronics are useless, and your furniture is irreparably damaged.

Time to put your life on hold? Not if you have renters insurance. Even though this incident is clearly the fault of your landlord, you’d be on the hook for the cost of replacing your damaged possessions without sufficient renters insurance coverage. While your landlord’s policy covers the unit’s structural components and appliances (and furniture, if the place came furnished), it doesn’t extend to anything you own.

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Drawbacks to Renters Insurance

1. Collections or Specific Valuables May Require Additional Coverage

Renters insurance covers the cost of replacing everyday possessions and equipment, but it always comes with a coverage limit – it may be as low as $5,000 or as high as $500,000 – and generally doesn’t cover novel or valuable possessions. For example, if you store multiple pieces of jewelry in your apartment, your renters policy might not cover it (even a regular old engagement ring might not fit the bill). If you have extensive collections of records, stereo equipment, shoes, artwork, even rare books, you might also be out of luck.

You can still cover these items, but it will cost you. Look into purchasing a rider – a supplementary policy that covers specific items and appears on your main policy as a separate line item – or specialized insurance for high-value items. For instance, Allstate offers “high-value item insurance” that allows you to exceed its coverage limits of $1,000 per jewelry piece and $2,500 for all electronic equipment. It also allows you to bundle multiple high-value items such as jewelry into a single group, or take out scheduled personal property coverage that itemizes your premiums for specific possessions.

2. It Doesn’t Cover Everything

If you’ve ever been involved in a car accident that wasn’t covered by your auto insurance policy, you know that simply carrying insurance doesn’t unconditionally free you from financial or personal liability. Depending on the size of your deductible, you must make some out-of-pocket payments before your coverage kicks in. Additionally, in the case of auto insurance, your policy may only include personal liability coverage that protects you in the event of a lawsuit; if you lack comprehensive coverage, you might be liable for all costs related to damage to your vehicle’s glass, collisions with wild animals, and other steep expenses. Therefore, before you take out your renters insurance policy – and for as long as you keep it – you need to expend some effort to maximize the chance that it will deliver when the time comes.

First, this demands a careful look at your coverage limits and exclusions. According to Esurance’s website, the average renter owns personal property worth somewhere in the neighborhood of $20,000. If you’re “average” in this regard, you’ll need at least this much coverage to insulate you against a total loss, and it might be a good idea to take on additional coverage if you anticipate making big purchases in the near future. As noted above, it’s crucial to mind coverage limits on specific product categories as well. Electronics, jewelry, and rare collections stand out here – to minimize the cost of a rider or supplemental policy (by taking advantage of bundling discounts), purchase it at the same time, and through the same insurer, as your main renters insurance policy.

It’s also critical to understand what renters insurance doesn’t cover. Like homeowners insurance, rental coverage is stingy about paying for flood damage and sewer problems. If you live in an area that’s prone to flooding from a natural source such as a river or ocean, ask your insurer whether you’d be covered in the event of a flood; if not, look into supplemental flood insurance policies, which may be subsidized by state or federal programs.

If you occupy a ground-floor or basement apartment that’s prone to flooding or damage from sewer backups, your renters policy may not cover associated cleanup costs. Your insurer should offer supplemental “sewer and drain” coverage.

Finally, when you take out your renters insurance policy, you must choose between a “replacement value” policy and an “actual cash value” policy. In the event of an accepted claim, the former reimburses you for each lost or destroyed item’s value at the time of purchase, which makes it all the more important to save your receipts. The latter, meanwhile, reimburses you for each item’s depreciated value. Depreciation calculations are complex and therefore difficult to make generalizations about, but electronics such as computers and TVs tend to lose most of their value within three to five years. More durable items like couches, tables, and jewelry may retain their value for longer.

While actual cash value policies are significantly cheaper than replacement value policies, they don’t cover the real cost of replacing valuable goods. If you’re an avid user of electronics or a collector of rare, hard-to-value items, it may be worthwhile to invest in a replacement value policy.

3. It Can Be Very Expensive

As noted, rental insurance policies come with coverage limits. With most insurers offering policies of $100,000 or more, it’s likely that you’ll be able to find ample coverage. It’s really a question of what you’re willing to pay. You can reduce your monthly premiums by accepting a higher deductible – the amount that you must pay out of pocket before your coverage kicks in – but this lessens the policy’s effectiveness. And again, standard policies may not cover high-value items, such as $5,000 rings and $10,000 stereo systems. The cost of riders or scheduled property protection can add up quickly.

Your personal and financial profile may introduce additional costs: Renters who have solid credit scores (650 and up) generally pay less for comparable policies than those who have suboptimal scores. And ultimately, your reimbursement for a specific claim may turn on events that aren’t wholly within your control.

To reduce long-term payouts, many insurance companies place a dollar cap or time limit on reimbursements for temporary living expenses. If it takes four months after a fire to restore your apartment to a livable condition and your renters insurance policy only covers relocation expenses for two months, you’ll need to pay out of pocket for those other two. In other words, it’s probably best to assume that your renters insurance policy won’t cover every single expense that arises out of an unfortunate circumstance.

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Important Factors to Keep in Mind

It’s not always helpful to see things in black and white. These considerations aren’t necessarily “benefits” or “drawbacks,” but they’re critical to keep in mind.

1. Liability and Content Insurance Can Be Purchased Separately

Many renters purchase content insurance and liability insurance as part of a comprehensive package. If you’re really serious about controlling your policy’s costs, though, you can purchase each one separately. Whether you can do so depends on the value of your possessions and the manner in which you use your living space.

If live in a modern, well-maintained building and own lots of valuable items but don’t host parties or gatherings on a regular basis, you may wish to obtain a contents-only policy. This won’t protect you against liability costs such as injured guests’ medical bills or water damage that originates in your apartment and spreads to other units, but the tradeoff may be worthwhile if you deem such incidents unlikely.

If you live in an older, poorly maintained building and frequently host get-togethers but don’t own a lot of valuable items, you may be a good candidate for a liability-only policy. In either case, it’s best to talk to a representative from your insurance company before pulling the trigger on an incomplete policy.

2. Your Landlord May Require It

Landlords typically carry insurance policies that cover their properties’ structural components, infrastructure, and certain elements of liability. But this coverage doesn’t extend to renters’ possessions or personal liability.

Some landlords have begun to require their tenants to carry renters insurance policies. There’s no law that prevents them from doing so, although the requirement must be explicitly spelled out – along with minimum acceptable requirements for the insurance policy itself – in a signed, dated lease. If your landlord won’t agree to renew your lease unless you obtain coverage, you may need to take the plunge.

3. Policies May Cost More in Certain Areas

The average cost of a renters insurance policy that lacks high-value riders or scheduled coverage isn’t exorbitant. If you live in a city or region with above-average crime rates, your premiums will be somewhat higher than for a comparable policy in a low-crime area. Ditto for premiums on policies in areas prone to catastrophic weather events such as hurricanes, floods, tornadoes, and wildfires.

If your apartment is located in a particularly vulnerable area – for instance, along the hurricane-prone Gulf Coast or on a major river’s floodplain – you may need to purchase a rider that covers weather-related flood damage, wind damage, and other relatively likely occurrences. Fault zones are expensive too, but they may be handled by dedicated, state-run agencies that offer “affordable” policies. For instance, the California Earthquake Authority offers “catastrophic” policies that cover losses related to serious tremors. If you live in the L.A. Basin or the Bay Area, you may wind up dealing with a private insurer for your “regular” renters insurance needs, and the CEA for supplemental earthquake coverage.

4. It’s Your Responsibility to Keep Track of Covered Items

Before you validate your policy, meticulously catalog your apartment’s contents. You need to provide your insurer with a rough accounting of these contents anyway, but a more detailed review is critical for your own records.

Photograph every item of value that you own when your policy goes into effect; to the extent possible, save the purchase receipts for each item as well. Do this for every big purchase that you make after your policy goes into effect too. Make digital/cloud-based backups of these photos, and save your receipts in a fireproof safe or box. It sounds like overkill, but it’s a relatively small investment that can dramatically increase the likelihood that your claim will be accepted.

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How to Determine the Amount of Coverage Needed

Whereas homeowners with active mortgages are generally required to insure their properties, renters with active leases face no such mandate. It follows that renters insurance isn’t as prevalent – at least on a per capita basis – as homeowners insurance. Instead of taking out separate or bundled renters insurance policies, responsible renters – especially those who plan on renting over the long term or who have accumulated valuable possessions – may choose to build up an emergency fund sufficient to cover the cost of replacing their apartment’s contents.

Is this course of action right for you? It depends. First, it’s important to remember that you can insulate yourself from certain types of risk – namely, liability for misfortunes that befall your guests, maintenance workers, and your building’s other tenants – without insuring all of your personal property.

The Benefits of Liability Coverage

You can (and often should) purchase liability insurance separately from content insurance. While it may be difficult for you to make the financial case for carrying content insurance (as opposed to an ample and well-managed emergency fund), it’s harder to argue against the benefits of basic liability coverage on your apartment. For starters, unprotected liability costs can quickly spiral out of control – if an injured guest needs to stay at the hospital overnight, you’re easily looking at a five-figure medical bill.

No matter how close your relationship with the injured guest, you shouldn’t count on good graces to protect you from legal action. When it comes to liability, friendly guests are the least of your worries.

If you or your landlord calls a contractor or service professional to your apartment to address an electrical, plumbing, HVAC, or structural issue, you may be liable for any mishaps – such as serious falls, puncture wounds, blunt-force injuries, or electrocution – that befall them during the course of their work. You’ll also be liable to neighbors who suffer property damage or injury as a result of a hazard that originates within your apartment.

According to Assurant, a property insurance company, the national average cost of a liability-only renters insurance policy with a coverage limit of $100,000 is about $11 per month, or $132 per year. Even if you carry this policy for a decade, spending just over $1,300 in the process, you’ll pay far less – probably an order of magnitude less – than you would to settle a legal dispute over just one overnight hospital stay for which you’re found liable.

Weighing the Cost of Content Coverage

The average cost of a “typical” renters insurance policy – which the Independent Insurance Agents & Brokers of America defines as $30,000 of property/contents coverage, and $100,000 of liability coverage – is about $145 per year. The average cost of all renters insurance policies, a category that includes policies with much higher coverage limits, is about $185 per year.

In low-crime states that aren’t prone to catastrophic weather events, such as the Dakotas and Minnesota, premiums can be 30% lower than the national average. In more “dangerous” areas along the West Coast and Gulf Coast, premiums can exceed the average by 20% to 30%.

When the alternative is a total loss of furniture, clothing, and electronics with a collective value of thousands or tens of thousands of dollars, paying $185 per year – or $1,850 over 10 years, or $3,700 over 20, before inflation – seems like a no-brainer. However, this headline figure is a bit deceptive due to factors such as your policy’s deductible and coverage limits.

As you weigh the costs and benefits of purchasing content coverage, it’s useful to break your options into these broad but well-defined categories:

  • Top-Tier Policies With a low deductible (between $0 and $300) and high coverage limits (more than $50,000 in content coverage), these policies are designed to minimize your financial exposure to a total loss, as well as itemized losses on high-value items. Premiums on these policies are far higher than the national averages quoted above, but the tradeoff for this expense is peace of mind. If you feel like you need a top-tier policy, you probably have some expensive or rare possessions, and you may need to investigate riders or supplemental insurance to ensure that they’re adequately covered.
  • Family Policies. These policies come with low to moderate deductibles (between $300 and $500) and high coverage limits (more than $50,000). They’re especially useful for families or middle-class couples who plan to rent for the long term; typical policyholders have lots of stuff to protect, but may not be able or willing to pay for top-tier coverage. It’s a good idea to complement this type of policy with an emergency fund, which a growing family should probably have anyway.
  • Middle-of-the-Road Policies. With larger deductibles (between $500 and $1,000) and lower coverage limits (between $20,000 and $50,000), these policies are popular with younger, upwardly mobile renters who earn decent incomes but haven’t yet accumulated lots of high-value possessions or started families. They’re useful for protecting electronics, clothing, and other important (but not incredibly valuable) items. Given the size of the deductible and the potential for the cost of a total loss to exceed the policy’s coverage limit, your middle-of-the-road policy should be paired with an emergency fund.
  • Low-Cost Policies. Similar to “catastrophic” health insurance policies, these instruments come with high deductibles ($1,000 or more) and relatively low coverage limits (less than $20,000). They’re ideal for lower-income folks, such as students and recent graduates, who haven’t accumulated high-value possessions and won’t be crushed by the prospect of paying out-of-pocket to replace specific items. With a low-cost policy, you might not be able to afford to replace all of your possessions at once. If you’re looking to get back on your feet quickly after a mishap, then it’s essential to have a robust emergency fund to complement your policy’s relatively low payout.

If you’re willing and able to pay for a top-tier policy – with or without attendant riders and supplemental insurance – that’s adequate to replace all of your possessions, it may make more sense for you to bundle your liability and content coverage in a single package. If you don’t own a lot of expensive equipment or accessories, it may be better to forgo content insurance, purchase a liability-only policy, and use an emergency fund to cover the cost of lost, damaged or stolen items on an as-needed basis. But the ultimate decision should be reached after careful examination of your situation and priorities.

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Keeping an Emergency Fund In Lieu of Content Coverage

Another option for content coverage is to start or augment an emergency fund that’s specifically earmarked for unexpected expenses related to your apartment and its contents. You could do this in place of purchasing renter’s insurance, the premiums essentially going toward your fund instead of the insurance. However, you really don’t want to forgo liability coverage or try to save for it on your own given the costs involved with medical bills and/or potential lawsuits.

Any emergency fund should be held in an FDIC-insured savings account from which you’re permitted to make withdrawals at your discretion. While it might be tempting to seek higher returns on your “investment,” liquidity is a crucial aspect of your emergency stash. One of the benefits of an emergency fund is that your funds aren’t limited to an apartment emergency, but can be ready for other emergencies as well.

However, accumulating an amount to cover the cost to replace your contents may take years. If you decide to go without content coverage, be sure that you’re able to accept the risk that comes with leaving your non-essential possessions uncovered.

Another option is to ask your insurer about only insuring your most valuable items such as your computer, cell phone, or tablet computer. This coverage is often extremely affordable.

Final Word

For some renters, renters insurance is a useful tool that can hasten recovery from an unfortunate incident and lessen the financial impact of theft, property damage, and liability. For others, it may be less useful than a stable, well-managed emergency fund that’s specifically earmarked for similar purposes.

Ultimately, your choice to obtain renters insurance is a personal one that turns on the nature and value of your apartment’s possessions, as well as your perceived exposure to liability issues. If you already have ample savings or a robust emergency fund, you may well be able to get by without it. Then again, it never hurts to request quotes from reputable insurers – especially if you’re looking to bundle your renters insurance policy with additional policies.

Do you feel like you need renters insurance? Or would you rather maintain a separate emergency fund instead?

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Many motorists understandably ask themselves, "Does my car insurance cover other drivers?", or "Does auto insurance cover the car or the person?" In most of the United States, auto owners are required to carry minimum coverage in order to be able to legally drive, so understanding auto insurance can make the difference between who you allow to drive your car and who you decide should stay in the passenger seat.

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Does My Insurance Cover Another Driver?

Knowing what car insurance will cover and what it will not is especially important when it comes to friends driving your car. There is a wide variety of car insurance available to you, each with its own features. Before you let a friend borrow your car, you should know if your auto insurance coverage applies to them. Go through the definitions of the different types of coverage to get an idea of the protection they offer. Then call your insurance company. They will be able to give you a complete rundown of coverage features.

Liability Coverage
Liability car insurance coverage follows a driver no matter what car they are driving. Most states require at least liability coverage and many states have assistance programs for low income residents who qualify. Liability coverage is what allows a driver to drive a friend's car and still be covered under their own auto insurance policy. If you plan to allow your friends to drive your car, one of the questions you should ask is about what kind and level of insurance coverage they already own. Knowing the answer may prevent problems down the line should they be driving your car and an accident occurs.

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Comprehensive and Collision
Comprehensive and collision auto insurance coverage are specifically linked to the car that is being covered. These policies provide coverage for damage that may occur to a car as a result of an accident or vandalism. Charges for comprehensive and collision coverage are usually higher than liability coverage and they are additional expenses to the policy.

Other Drivers
The question of allowing other drivers to drive your car and whether or not they will be covered by your existing auto insurance is an important one. Unfortunately, there is no blanket yes or no answer, since this is something that varies from policy to policy.

When purchasing auto insurance, you should talk to the agent about who precisely is covered and what happens if you give permission to someone to drive your car and there is an accident. If you have complete coverage, many insurance carriers will cover the driver, but only at the minimum coverage limits. However, there are certainly insurance carriers who will not cover any driver who is not specifically named in the policy.

Another important factor can be where that person resides and if they are related to you. In general, if someone is living in your household and they regularly drive your car, then the insurance carrier expects you to have that person named on the policy. They will need to undergo the same underwriting and qualification process as any other policy holder.

In some cases, if a family member is visiting and has permission from you to drive the car, then the insurance company will cover them if there is an accident, but the coverage may be limited. Additionally, in the future, that person may be specifically excluded from any future inclusion on the policy and your rates may increase as a result of any accidents.

When purchasing auto insurance, carefully review the details on excluded drivers and any limitations on coverage for anyone driving the car who is not specifically named on the policy.

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Someone Else's Car: What Drivers Does Auto Insurance Cover?

In the event that you find yourself in this situation, insurance coverage when driving someone else's car is, in general, the coverage you carry for your own vehicle. Your personal auto insurance coverage will apply in most cases when you drive a vehicle not your own. This includes any uninsured motorist coverage you carry and the medical portions of your policy. Although not always, your property damage coverage might carry over while driving another's car as well. As should be expected, if you drive your own car without insurance, do not expect that you are covered when driving another's car.

When You Are Covered
If you carry auto insurance for your own vehicle, when driving another's car, typically you are covered by your own policy in the event that you get into an accident. Certain factors may be weighed including the reasons for driving a car other than your own, if you had permission or not or if it was a rental or dealership loaner. In each case, the individual circumstances will be investigated, but generally speaking you are covered by your own insurance.

With some policies, provided the car is insured, the insurance will cover any drivers of that car. This is not always the case, though. Some insurers require that all drivers be listed in order to be covered. One detrimental consequence of this involves the car being stolen. In some instances, if the car is stolen and the thief gets into an accident, your insurance won't cover the damages, sticking you with the bill. It only applies if you have given permission for a particular driver to operate your car.

With comprehensive insurance which covers almost everything, it is the car rather than the driver that is covered. This, however, requires many stipulations to be put in place such as who is allowed to drive the car. If you are driving a car with this type of insurance, if you are not listed as a driver--even if you have permission--you may not be covered in an accident.

Under normal circumstances, provided either the car you are driving is insured or you carry insurance for your own vehicle, an accident will be covered. Since insurance follows the car, the insurance covering the car you are driving (with permission) will cover at-fault accidents. If the car has no insurance attached to it but you do, your insurance will most often kick in and cover you. It is a complicated situation, but as long as you have permission to drive another's car and either the car or you have insurance, you will be covered in the event of an accident. The best thing to do, however, is check the exact stipulations of yours or your friend or family member's insurance company.

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Related Questions and Answers

Does my Auto Insurance Cover any Driver?

Most auto insurance polices will cover any legal driver that gets behind the wheel of your car. However it is best not to assume this is the case. Individual policies vary from company to company and person to person. Typically the crux of the issue is if the owner gives another person permission to drive their vehicle. In these instances, nearly every policy will cover another driver. Drivers without permission are almost never covered by insurance policies. Prior to making an important assumption, it is recommended you check with your insurance agent before allowing other drivers behind the wheel of your car.

Does Comprehensive Insurance Cover Other Drivers?

Most of the time, your comprehensive insurance will cover drivers that you allow to operate your vehicle. Your policy may vary, so you should check with your insurance provider prior to allowing anyone else to operate your vehicle. Family members (such as kids or a spouse) are generally already included in your policy. No insurance will cover a driver that operates your car without the owner's permission. Your terms and conditions may vary depending on your provider.

Does my Auto Insurance Cover Other Drivers in Another State?

Generally your vehicle auto insurance will cover a driver from any state as long as he or she has permission to operate the vehicle. However, this isn't always the case. In all instances when someone else operates your car, you should check with your agent prior to allowing others to drive it. Auto coverage and policy may vary (even greatly) depending on your company and the insurance options you have picked. It is always a good idea to review this information ahead of time.

Will my Insurance Cover an Accident with my Car if I Was not There?

In order for your insurance to cover an accident when you are not present, you will need to have comprehensive auto coverage. Assuming this is the case, then the answer is maybe, but probably. The instances in which your car became involved in the accident definitely matter. If the driver is a relative, then most likely your insurance will cover the accident. The driver also needs to have had your permission, otherwise your insurance will most likely deny the claim (unless the vehicle was stolen). Individual insurance companies and policies may vary in regards to these rules, therefore you should always check with your agent prior to allowing anyone to operate your vehicle.

Is a Driver Covered by their Insurance when Driving a New Car Home?

Once you get a car loan and purchase a new car, you can then take it home. Most states require you acquire proof of insurance, or notify your agent, prior to allowing you to take your new vehicle off the car lot. Should the unthinkable happen, your car insurance will cover you in the event of an accident. This is the reason you need to contact your agent and get the paperwork faxed to the dealership. Each auto dealership is required to make sure you are legally operating the vehicle prior to leaving the lot.

What are the Auto Insurance Minimum Requirements for California

Almost every state has an auto insurance minimum requirement. California is one of the states that has minimum insurance requirements. The state requirements of California are as follows. $15,000 for bodily injury liability; this is the maximum amount that will be paid for one person that is injured in an accident. $30,000 Bodily injury; the maximum amount for all the injuries in the accident. Finally, $5,000 for property injury liability per accident. These coverages are liability coverages which pay the medical bills of the accident victims. Your injuries and vehicle are not covered. These minimum requirements would be far from sufficient if you are in a serious accident.

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Whether you buy coverage from a rental agency or use your own car insurance, it's wise to make certain you have enough insurance to pay for costly repairs if you suffer an accident in a rental car.

Before renting, familiarize yourself with all your insurance options. If you already have car insurance, call your insurance agent and find out if you will have enough coverage under your existing policy. You could also call your credit card company: Many offer coverage when you charge the rental.

In either case, these two options may be cheaper than purchasing insurance at the rental counter.

Which insurance works best as rental car insurance?

  • Your auto insurance

If you have car insurance, the type of coverage you bought, along with its deductibles, usually applies to rental cars as well.

Assuming you purchased collision coverage, it will cover damage you cause to any car that you're driving. However, many auto insurance policies say that your collision insurance is "excess" to any other coverage, meaning that any coverage you buy from the rental car company kicks in first. Don't forget that your own collision insurance requires you to pay a deductible before the insurance company picks up the tab.

Your comprehensive coverage will likely apply to any rental car you drive and cover fire, theft, vandalism or animal collisions. Again, your own comprehensive coverage is excess coverage and is subject to your deductible.

If you cause an accident, your liability insurance will pay for the damages you cause to someone else, plus any medical expenses that arise from your negligence. Your liability insurance will cover you up to the limits of your policy, and if you were driving a rental at the time of the accident, your personal auto liability insurance, like your comprehensive and collision, will likely be excess coverage.

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  • Your credit card's insurance

Many credit card companies offer rental car insurance benefits for free if you charge the cost of the rental on your credit card. If it's not free, your credit card company may offer a cheaper deal than if you purchased it at the rental counter. However, the Insurance Information Institute (III) recommends that if you choose insurance offered by a credit card company, ask to have the details of your coverage sent to you in writing. Credit card insurance coverage varies greatly from company to company. Some credit card policies cover only damage to your rental car but not to other cars. Others do not offer personal liability coverage for bodily injury or death claims. Do your homework.

  • Rental car company's insurance

Rental car companies sell various types of insurance and waivers that broaden your liability protection and relieve you of the responsibility of paying for a wrecked rental.

Loss damage waivers (LDW) and collision damage waivers (CDW) from the rental company essentially take the place of your own collision and comprehensive insurance, letting you off the hook if the rental is stolen or vandalized, or if you crash it. Some LDWs include the CDW, and some waivers require you to pay a deductible, just like your comprehensive and collision insurance. But be careful. According to III, your coverage may become void if the accident was caused because you were speeding, driving under the influence or some other reckless error on your part.

These waivers are not an insurance product because they're not underwritten or sold by an insurance company. It's the rental car company's version of comprehensive and collision insurance. If you already have comprehensive and collision insurance for your own car, don't duplicate coverage you already have. But if you've dropped your comprehensive and collision coverage or don't have auto insurance, it's worth the money. According to III, this coverage generally ranges from $9 to $19 per day.

There are also Additional Liability Insurance supplements. If you are worried that your own auto policy has low liability limits, you can purchase extra coverage for between $7 and $14 per day, according to III. It will often cover you for up to $1 million if you cause an accident, damage property or injure others. If you purchase this insurance from the rental car company, it becomes your primary liability insurance. Your own personal auto liability insurance is, again, relegated to excess-coverage status. However, III suggests that buying an umbrella policy may be much more cost-effective.

A rental car company may also offer to sell you accidental death and personal property insurance. For example, the Avis rental car company offers Personal Accident Insurance (PAI) that provides accidental death benefits and medical expense benefits to the driver and all passengers. Avis' PAI provides $175,000 in accidental death coverage, $2,500 in medical coverage for injuries due to an accident and $250 for ambulance expenses. (Limits in New York are different.)

Most rental car companies also offer "personal effects" coverage for your personal property that might get stolen out of the rental vehicle.

Should you buy rental car insurance?

Making sense (and cents) out of all the coverages you already have on your car insurance and the ones that are offered by the rental companies is not easy. Buying all of the insurance offered from a rental car company can double your rental costs. Buying none of it might put you in a bad financial spot if you have an accident. Here are some factors to keep in mind.

If you don't have collision and comprehensive insurance and you're renting a car, it's a good idea to purchase the LDW or CDW, whichever your rental company offers. You might want to buy the waiver that offers you the broadest protection in this situation. Rental companies have several levels of damage waivers.

You might decline the LDW altogether if you have collision and comprehensive coverage because you'd be paying for "double coverage." But remember that you still have to pay your deductible if the car is stolen or vandalized, or if you crash it.

If you don't have personal auto insurance, you should compare products offered by your credit card company, rental car company and a non-owners auto insurance offered by regular auto insurers.

Also, remember that most states require the rental companies to automatically provide at least the minimum required liability coverage at no charge to you. If you feel that you can get by with just the bare-bones policy, you won't spend a dime on liability insurance.

If you have your own liability insurance, it will generally kick in first in the event of an accident. There's no deductible for liability insurance.

When purchasing coverage at the rental counter, keep in mind that their offerings of accidental death and personal property insurance give you needless "double coverage" — if you already have health, homeowners or renters and life insurance. Typically, your health insurance (or auto insurance if you have MedPay) will kick in for your medical costs, regardless of what car you're driving. Your homeowners or renters policy normally covers personal property if it's stolen or damaged while in your car. And your life insurance will pay out, regardless of how you meet your end.

To sum rental car insurance options

Before you rent a vehicle, check your auto insurance and homeowners or renters policy to get an idea of what coverage you have while in the rented vehicle. And while at the rental car company, take some time to find out exactly what they offer. Compare those coverages to the ones you already have. That way, you can avoid buying coverage you don't need.

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