Rental cars extra insurance when renting
A car rental, hire car, or car hire agency is a company that rents automobiles for short periods of time, generally ranging from a few hours to a few weeks. It is often organized with numerous local branches (which allow a user to return a vehicle to a different location), and primarily located near airports or busy city areas and often complemented by a website allowing online reservations.
Car rental agencies primarily serve people who require a temporary vehicle, for example those who do not own their own car, travelers who are out of town, or owners of damaged or destroyed vehicles who are awaiting repair or insurance compensation. Car rental agencies may also serve the self-moving industry needs, by renting vans or trucks, and in certain markets other types of vehicles such as motorcycles or scooters may also be offered.
Alongside the basic rental of a vehicle, car rental agencies typically also offer extra products such as insurance, global positioning system (GPS) navigation systems, entertainment systems, mobile phones, portable WiFi and child safety seats.
- 1 History
- 2 Business models
- 3 Types of vehicles
- 4 Rental conditions
- 5 Insurance/waivers
- 6 See also
- 7 Notes and references
- 8 Bibliography
- 9 External links
The earliest known example of cars being offered for rent dates to 1906.  The German company Sixt was established in 1912 with three cars for rent.
Joe Saunders of Omaha, Nebraska first started with only one borrowed Model T Ford in 1916, but by 1917, his Ford Livery Company was renting out 18 Model Ts at 10 cents per mile. The company name became Saunders Drive-It-Yourself System and then Saunders System. By 1926, Saunders had expanded to 56 cities. Saunders' company was bought by Avis in 1955.
An early competitor to Saunders was Walter L. Jacobs, whose Chicago-based Rent-a-Car opened in 1918 with twelve Ford Model T. The company was bought in 1923 by John Hertz.
In Britain, car rental started with Godfrey Davis, established in 1920, and bought by Europcar in 1981.
The sector expanded rapidly in the US; in 1926, the American Driveurself Association assembled over 1200 delegates in Chicago.
The growth in travel after World War II led to the establishment of several well known international companies, including National Car Rental (1947), Europcar (1949), Enterprise Rent-A-Car (1957), Thrifty Rent A Car (1958), and Budget Rent a Car (1958).
Business modelsThe Rental Car Center at George Bush Intercontinental Airport
Car rental companies operate by purchasing or leasing a number of fleet vehicles and renting them to their customers for a fee. Rental fleets can be structured in several ways – they can be owned outright (these are known as ‘risk vehicles’ because the car rental operator is taking a risk on how much the vehicle will be sold for when it is removed from service), they can be leased, or they can be owned under a guaranteed buy-back program arranged directly through a manufacturer or manufacturer’s financial arm (these are known as ‘repurchase vehicles’ because the manufacturer outlines the exact price of original sale and of repurchase at the end of a defined term).
In the UK, the registration of rental cars can be concealed by using unfamiliar initials or subsidiaries, which can increase the resale value via manufacturer or third party dealers. In North America, it is common to see rental companies with their own branded second-hand car dealers where ex-rental stock is sold direct to the public. Alternatively, auctions are often used such as Manheim Auctions in the USA.
Types of vehicles
Most car rental offices offer a range of vehicle sizes to suit a variety of budgets and space requirements and some additionally offer specialized vehicles to suit its location such as convertibles, prestige models, hybrid/electric vehicles, or SUVs and passenger vans. At major airports or in larger cities, some independent car rental agencies offer high-end vehicles for rent. Some specialized companies such as Rent-a-Wreck offer older vehicles at reduced prices.
To allow for a uniform classification and easy comparison of car rental prices, the Association of Car Rental Industry Systems and Standards (ACRISS) has developed the ACRISS Car Classification Code coding system. This describes the size, door count, gearbox type (manual/automatic), and whether the car is air-conditioned, encoded into four letters. The first letter in the Acriss Code represents the general classification of the vehicle (e.g. Mini, Economy, Compact etc.). The second letter specifies the vehicle variant on offer (e.g. 4 Door, Estate, Convertible, SUV etc.). The third letter is generally used to specify the transmission type, although it can also be used to describe how many wheels drive the vehicle, and the fourth letter describes the fuel type and whether the vehicle has air conditioning or not.
Additional classifications based on seat numbers and trunk volume were also set by the Belgian Rent a Car association in order to provide a unified system for assessing the car types in online reservation systems such as Amadeus or Sabre.
Car rentals are subject to many conditions which vary from one country to another and from one company to another. Generally the vehicle must be returned in the same condition it was rented in, and often must not exceed mileage restrictions, otherwise extra fees may be incurred.
For insurance reasons, some companies stipulate a minimum and/or maximum rental age. In some cases, the minimum age for rental can be as high as 25, even in countries where the minimum legal age to hold a driver's license is much lower, e.g. 14,15,16 or 17 in the United States. It is not uncommon for there to be a young driver surcharge for all drivers aged under 25.
In all cases a valid driver's license is required in order to rent a vehicle, and some countries require an International Driving Permit (IDP).
The majority of car rental companies require the use of a credit card to charge additional fees should a defect be found with the car on its return or for road tolls, motoring related fines, or missing fuel. In lieu of a credit card, some companies require a large cash deposit. Some companies, such as Enterprise, permit a debit card for deposits, typically with proof of a round-trip travel ticket, e.g. an airline, bus, or train ticket.
Although frequently not explicitly stated, US car rental companies are required by respective state law to provide minimal liability coverage, except in California and Arizona, where the driver is solely responsible. This covers costs to a third party in the event of an accident. In most states, it is illegal to drive a car without liability coverage. The rental car companies maintain liability insurance on their vehicles; however, some companies will charge for this, should you not provide your own insurance. As an example, in Maryland, the minimal level of liability coverage is $20,000 for bodily injury and $15,000 for property damage.
It is typical, when renting a car, to be offered various forms of supplemental insurance and/or damage waivers as an optional extra at additional cost. There are several types of coverage:
- Loss Damage Waiver (LDW) - covers the cost of damage to the rental vehicle, up to the full value of the vehicle, in the event of an accident. Typically LDW covers 100% of costs without a deductible additional fees. Note that LDW/CDW coverage is not insurance and does not offer the same coverage product as a damage insurance policy.
- Collision Damage Waiver (CDW) - Generally covers the costs of damage from a moving accident. As the name suggests, non-collision based damage is often not covered. In many cases, in the event of an accident a fee or deductible applies.
- Supplemental Liability Insurance (SLI) – a product often sold in the USA which provides coverage in the event of an accident causing bodily injury or property damage to someone other than the renter and passengers.
- Personal Accident Insurance (PAI) – covers medical costs and accidental death for the renter and passengers in the event of an accident during the rental.
- Personal Effects Coverage (PEC) – insures against risk of loss or damage to the personal belongings of the renter (and sometimes the members of the renter's family while traveling with the renter) during the period of the rental.
- Excess Insurance – Collision damage waiver, Theft and Third Party Liability coverage are often included in car rental prices in Europe, Africa, and Australasia. There is almost always an excess on these (also referred to as Super CDW, Non Waiver, or Deductible), which involves an amount of money customers must pay in the event of damage, to discourage drivers from making small claims. A higher excess usually results in a lower upfront insurance cost for customers, but if damage occurs costing less than the excess to repair, then there is little incentive for customers to claim, benefiting the insurer. Excess insurance (also known as excess reduction, or damage liability waiver) is a secondary insurance which covers the cost of that excess in the event of a claim. Car-rental companies in Europe, South America, and Australasia will generally offer this cover as an opt-in secondary insurance, though third party insurance companies also sell excess coverage for hire cars, which may offer greater protections than standard coverage.
In the USA, the sale of these supplemental insurance/waiver products may be regulated by each state's insurance department, and a special limited license may be required by the rental company in order to sell them. The specific coverage offered can differ substantially, depending on the state or country in which the car is rented.
- Avis Rent a Car
- Consolidated rental car facility
- Damage waiver
- Dollar Thrifty Automotive Group
- Auto Europe
Notes and references
- ^ a b "Car Renting... Its Development... And Future", Automotive Fleet, December 1962 full text
- ^ a b "Joe Saunders", Omaha Innovators Archived September 13, 2013, at Archive.is
- ^ "Walter L. Jacobs, 88; Rent-a-Car Pioneer". LA Times. 1985-02-08. Retrieved 21 January 2012.
- ^ "How to Explain Loss of Use to an Insurance Company". Auto Rental News. Retrieved 29 April 2014.
- ^ Swaine, Jon (14 September 2009). "Used-car buyers unwittingly bought ex-rental vehicles". Daily Telegraph. Retrieved 15 April 2013.
- ^ "Car Rental Insurance Tip Sheet". Consumers Unified LLC. Retrieved 29 April 2014.
- ^ "Top tips for saving money on holiday". The Guardian. London. 2009-07-11.
- ^ Charlton, Gill (2009-03-06). "Holiday advice: holiday car hire excess". The Daily Telegraph. London.
- ^ http://www.autorentalnews.com/t_inside.cfm?action=article_pick&storyid=567&pgNum=1
- Harris Saunders, Top up or down?: The origin and development of the automobile and truck renting and leasing industry--since 1916, 1985
|Wikivoyage has a travel guide for Renting a car.|
- Media related to Vehicle rental at Wikimedia Commons
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Before starting your road trip, DISB offers some things to remember about car insurance and rental cars before for your summer road trip.
Before Leaving on Vacation
Make sure your insurance identification card is in the car. Double-check that phone numbers for your insurance company and agent are listed on the identification card. If not, make note of these numbers to keep with your ID card and bring it with you.
If You’re In an Accident
- Remain calm.
- Check for any injuries and administer first aid, if necessary.
- Contact the proper authorities and inform them of any injuries. Regardless of the circumstances, report the accident to the police.
- Record the name, address and phone number of the other driver. Always write down the make, model and license plate number of all vehicles involved.
- Collect the names, addresses and phone numbers of all passengers and witnesses.
- Take photos of the accident scene, if possible.
- Do not admit fault.
- Ask the investigating officer how to obtain a copy of the police report.
- Notify your insurance agent or company immediately.
What to Expect After the Accident
If your car was damaged due to another driver’s negligence, the other driver’s insurance company should pay your rental car costs for a reasonable length of repair time. If your car is totaled, many companies will pay for your rental as a courtesy, but they are not required to do so.
If you are filing a claim with your own insurance company, the cost of a rental car will only be covered if you paid a premium to include rental reimbursement coverage in your policy. Most polices have a dollar limit for rental payments, so check your policy.
Things to Consider about Insurance Renting a Car
Car rental companies offer several different insurance options that your existing policy may already cover. They typically offer the following products at the counter:
Collision Damage Waiver is also referred to as a Loss Damage Waiver. If you have comprehensive and collision coverage on your own car, you will likely not need this additional protection. (Comprehensive insurance covers vehicular damages caused by accidents such as fire, theft, wind, hail or a run-in with a deer, vandalism, or theft. Collision insurance covers the cost of repairs or the actual cash value of the vehicle, if damaged in a crash or rollover.) This protection can cost an extra $10-$20 a day.
Liability Insurance covers medical expenses and damages to another person’s property as a result of a car accident caused by the insured’s negligence. If you are adequately insured on your own car, you may consider forgoing this additional liability protection. This supplemental insurance can cost $7-$14 a day.
Personal Accident Insurance offers coverage to the renter and passengers for medical bills resulting from a car crash. If you have adequate health insurance and disability income insurance, or are covered by personal injury protection under your own car insurance, you will likely not need this additional insurance. It usually costs about $1-$5 a day.
Personal Effects Coverage provides for the theft of personal items inside the rental car. If you have a homeowners or renters insurance policy, it generally covers this already. If you frequently travel with expensive jewelry or sports equipment, it may be more cost-effective to purchase a floater under your home or renters insurance policies so the items are fully protected when you travel. Generally, this coverage costs $2-$5 a day.
More Car Rental Insurance Tips:
- If your current policy doesn’t offer coverage for a rental car, see if an insurance rider can be added for a small fee.
- If you lack personal auto insurance and your credit card does not provide benefits, it might be wise to purchase the liability insurance and collision damage waiver at the car rental counter.
- Keep in mind that if it is a longer-term rental (e.g., a week, a month or more), there might be limitations on the coverage your existing auto insurance policy provides. Check with your insurance company or agent for details.
- If you don’t own a car, you might want to consider purchasing a non-owner auto insurance policy, because it provides benefits in addition to coverage for a rental car.
- Carefully review your auto insurance policy and check with your credit card issuer about auto insurance benefits. Many credit cards include some level of collision and theft protection. 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.
If an uninsured driver caused the accident, then your insurance company will pay for damage to your vehicle if you have collision coverage or uninsured motorist property damage. If your damage is repaired under your collision coverage — be aware you will still have to pay a deductible.
Even if your claims adjuster recommends a specific body shop, you may choose to have your car repaired at the body shop of your choice. To avoid confusion, notify the claims adjuster about your repair shop before any of the work is done.
If Your Car Is a Total Loss
If the damage is extensive, and the claims adjuster determines the cost to repair your car is greater than the value of your car, the insurance company might choose to declare your car a total loss. When this happens, your insurance company has the option to take the title for your vehicle when it issues payment on your claim.
The insurance company will use the Kelley Blue Book to value the car. The insurance company is required to pay what your vehicle was actually worth at the moment before the crash. The claims adjuster will check to see what a car like yours (same make, model and year) is worth in your general geographic area. It is also a good idea for you to independently research the value of your car before agreeing to a settlement with the insurance company.
Ramifications of Filing a Claim
An accident filed with your insurance company might cause your rates to rise. Premium increases are more likely when the accident is your fault; however, an insurance company might also raise your premiums if you have more than one not-at-fault accident within a policy period. If you have questions about a rate increase following a claim or you are involved in a claim-settlement dispute with your insurer, contact DISB at (202) 727-8000 or [email protected] to file a complaint.
Call DISB at (202) 727-8000 or email us at [email protected] if you have any questions about information on this page.
One of the most frequently repeated bits of travel advice is to avoid being coerced into paying extra for additional rental car insurance. When you pay with a credit card, you are usually covered by the policy that is included by the network that your card is affiliated with.
This advice, while generally true, glosses over a much more complicated insurance picture.
Many travelers think that they are covered by their credit card’s policy only to find out after a car accident that they were not.
Here are six common situations where you might think you are covered, but you’re really not.
1. Sorry, that Kind of Car Is Excluded
The rental car insurance that comes with your credit card has a long list of vehicles that are excluded. Many exclude exotic cars like Ferraris and Bentleys. But what about a Ford pickup truck? I once got upgraded to a Ford pickup when the company was out of the class of car I rented. Only later did I realize that my credit card excluded any vehicle with an open cargo bed or anything that may be considered a truck. Certain vans are excluded as well. Other policies exclude popular sports cars like the Ford Mustang, which are commonly part of rental car fleets.
What You Should Do
Familiarize yourself with the terms of the rental car insurance you are planning to use. Reserve a car that meets that definition and refuse an upgrade to a vehicle that is excluded.
2. No Coverage in that Country
You might not expect to be covered when you rent a car in a rough and tumble part of the world racked by violence and lawlessness, but how about countries like Italy? Since the fall of Mussolini, Italy has been a fairly peaceful place, but for whatever reason, credit cards seem to have a problem providing their insurance there, along with a few other popular tourist destinations. In addition to Italy, Ireland, Northern Ireland and Israel are all excluded from the coverage of Visa, MasterCard, American Express and Diner’s Club. The same is true for Jamaica, New Zealand, and in some cases, Australia.
What You Should Do
The Discover More credit card offers rental car insurance to vehicles rented anywhere in the world, except where prohibited by law. If you do not have a Discover card, or it is not accepted at your destination, you can still look for a rental car company that includes a collision damage waiver or offers car insurance for a reasonable price.
3. That Road Doesn’t Count
It is quite difficult to find a copy of the rental car insurance policies that apply when you use your credit card. And even if you do manage to obtain a copy, there is nothing there that excludes coverage in the event that your vehicle is damaged while driving on a dirt road. What you will find is a clause that excludes coverage any time you are violating the terms of your rental car agreement. Sure enough, virtually every rental car agreement forbids you from driving on an unpaved road. More than half of the roads in the United States are unpaved, and you can even rent a car in rural areas where almost every road is unpaved. Nevertheless, your credit card’s insurance company will deny your claim if an accident occurs on an unpaved road.
What You Should Do
Unless you can obtain written authorization from your rental car company to drive on an unpaved road, even purchasing their insurance probably will not help you. If you are renting near a national park or another tourist attraction featuring unpaved roads, there may be a local rental car company that will not forbid its use there. Otherwise, avoid all unpaved roads in a rental car or at the very least, use extreme caution.
4. No Coverage with a Loyalty Award Program
I am big fan of loyalty programs and award travel, but I will never redeem a rental car award. The key to the rental car insurance from your credit card is that you must reserve and pay for the entire rental using your card. If you redeem an award for a free rental from your airline program or even the rental car company itself, and you are on your own.
What You Should Do
Save your points and miles for airline tickets or hotel rooms, as the cost of added insurance will negate the value of the reward.
5. Congratulations, You Are Covered, But..
You’ve avoided renting a pickup truck in Jamaica with your frequent flier miles so that you can drive off road, but you still had an accident. You paid for your compact car with your credit card and it was damaged on a paved road, here in the United States.
Think you’re off the hook? Don’t get too comfortable with that insurance agreement.
The rental car company will still try its best to hit you up for administrative fees and loss of use. They will stand by the fictitious idea that all their cars are rented out all of the time, and renting out a car with a ding in the door is just not possible. So, each precious day that they can claim they weren’t renting out their valuable car, they will bill you for their highest rental rate. Then, they will add hundreds of dollars of administrative costs. If you’re counting on your credit card company to cover those charges and jump to your rescue, you might be shocked when they shrug their collective shoulders and tell you that those charges are not covered.
What You Should Do
Not every credit card company excludes loss of use and administrative fees. Visa’s contract does appear to cover such charges. Otherwise, you may consider such charges to be the deductible that you will be responsible for, in the event of an accident.
Despite all of these scary exclusions that I have discovered, I have yet to be a victim of any of them, as I have never actually damaged a rental car. That said, I’m sure my day will come. And when it does, I hope that I will have enough knowledge of the way credit card insurance coverage works, so that I won’t be denied my claim.
Have you been denied a car rental insurance claim from a credit card company? Why was your claim denied? Do you have a favorite insurance coverage from big name credit card companies? Share your thoughts and experiences in the comments below.Tweet