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Renting A Car? Better Check Your Coverage

Personal Business: Autos


If you're planning to rent a car, review your insurance before you decline those optional coverages at the rental counter. In more than half the states, one or more companies, including Alamo, Avis, Budget, Hertz, and National, recently changed their rental contracts to make your personal auto-liability policy the first to pay in case of an accident.

If you don't carry automobile insurance because you don't own a car, you have little choice. You must buy the rental company's daily liability coverage of $1 million or risk financial ruin if there is a serious accident. Unless you rent from a company that still assumes primary liability in a given state, a plaintiff will sue you first. If the claim is satisfied from your assets, the rental company is off the hook. And even in states where the rental-car company remains first in line, the state-mandated liability coverage is still only $30,000--peanuts if you hurt someone in an accident. For a claim above that amount, the driver's own insurance or assets must be exhausted before the injured party can recover more from the rental company.

ON THE ROAD AGAIN. If you don't own a car but rent frequently, ask your agent about nonowner auto insurance. It can cost about $300 per year for $1 million in liability protection and also covers collision damage to the car.

But even having personal auto insurance doesn't necessarily mean it extends to rental cars. Find out by asking your insurance agent. And don't settle for a verbal answer; ask him or her to circle the car-rental portion of the policy. In most cases, your automobile policy will provide liability coverage if you rent a car for personal use within the U.S. and Canada--but not if you drive abroad. And chances are the coverage is limited to $300,000, so consider buying a $1 million umbrella policy for about $100 per year if you have significant assets to protect.

Unlike liability, collision damage has never been the responsibility of the rental-car companies. And only about half of personal auto policies extend collision coverage to rental vehicles. "Collision always used to be transferable" to rental cars, says Charlotte Edelstein, a claims adjuster with H&R Phillips, an insurer in New York. "But that has eroded over the years."

To be safe, you must have the right private auto policy, buy the collision damage waiver at the rental counter for about $10 a day, or use a credit card that offers collision protection. All American Express and most Gold MasterCard and Visa cards provide collision protection when the card is used to rent the car.

When you initial the little box to decline the collision- damage waiver at Hertz, here's what you are signing: "You are responsible for the cost of repair up to the value of the vehicle, plus loss of use, towing, storage, impound fees, and an administrative charge." A key phrase is "loss of use," which refers to the income the rental company loses on the car while it is being repaired. Your credit card may cover it, but your personal insurance probably won't. So if there's an accident, you'll be out of pocket for your deductible of $250 or $500 and perhaps an additional $500 for loss of use.

SOBERING. If you're traveling on business, your employer is probably picking up the insurance when the company travel agent books the rental car. If you reserve the car yourself, buy the extra liability and collision coverages at the rental counter and let your employer reimburse you. Not all personal auto-insurance policies would cover you if you got into an accident while on a business trip.

If you need motivation to mind your rental insurance, here's a sobering thought: The odds of cracking up a rented vehicle are much greater than they are when you're driving your own car. "Forty percent of our car-rental fleet is damaged each year in accidents," says Joe Russo, a spokesman for Hertz. "You're unfamiliar with the car, you don't know the city, you're ogling the sights while your kids are screaming in the back seat, and boom, you run into something." Better make sure you're properly insured, or you could run through your bank account, too.Stuart Weiss

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