From time to time we all may have the opportunity to either rent a car on vacation or maybe even borrow a friend’s car for any other reason. Do you ever wonder if your current auto insurance covers you when you rent a car and whether you should buy the insurance offered to you by the rental car company? (this is typically referred to as the LDW – Loss Damage Waiver or CDW – Collision Damage Waiver). Does my current auto insurance cover me when I’m borrowing a friend’s car? Look in different perspectives
We need to look at these questions from two different perspectives and in so doing, we will be assuming (you need to check) that your current policy is modeled after the industry-standard Personal Auto Policy (Pap) introduced by the Insurance Services Office (ISO).
The first perspective is whether you are covered for injuries or damages to others you cause while using these non-owned autos. Whether you are driving a rented car or a borrowed car, if you are the named insured on your personal auto policy, the spouse of the named insured or a resident family member, most PAP’s provide very broad coverage for these liability exposures while driving non-owned autos. If you fit in one of these categories, your current PAP is more than likely going to cover you for your liability exposures for damages to others caused while driving any non-owned auto. There are some exclusions that could apply but typically, you would be covered for liability while driving these non-owned autos.
The second perspective, however, and the one most people erroneously worry more about, is whether my current PAP covers damage to the car that I am renting or borrowing. Once again, using the industry-standard PAP, you would be provided the same coverage on the non-owned auto that you are provided on your own autos on your PAP. Put another way, if you have Collision and Comprehensive (sometimes referred to as Other Than Collision) on at least one of your owned autos covered by your PAP, that same coverage would transfer to non-owned auto you are renting or borrowing. If therefore, your current PAP does not provide Collision and/or Comprehensive and at least one owned vehicle, there is no extension of coverage for damage to the non-owned auto.
As agents, this is one of the questions that we are constantly asked by you, our clients. Do I need to buy that insurance from the rental car company? The safest answer is “yes”. Since my current PAP is very broad and provides the coverages mentioned above automatically, you may ask why then should we buy the LDW or CDW!!
Rental car companies are notorious for charging you other indirect charges if you should damage their auto. These indirect charges such as loss from diminished value, administrative charges, storage, appraisal, etc. are typically not covered by your PAP. Click this link to another article on our website which goes into more detail on these indirect exposures and why you may consider purchasing the LDW or CDW!
Also, please bear in mind that you may have a credit card in your name that might automatically, or for a small charge, pick up this exposure if you rent the car using that card. Read the small print and let us know if we can help in any way! In any case, DRIVE SAFELY!!