Quandary at the Rental Counter

Should you buy that extra car insurance? Depends

You know the feeling. No matter how many times you've rented cars, you still wonder whether you should buy the collision, liability, and theft insurance the rental company offers. The coverage is outrageously expensive--from $7 to $25 a day, depending on what you select. Still, one of every five renters takes at least some insurance, according to a recent study by auto insurer Progressive. The most common reason: They don't know if they would be protected otherwise.

If only they had checked with their auto insurer or credit-card company before traveling, they might have saved some money. At least they would have known when it made sense to accept the additional insurance.

Typically, if you have full coverage on your own car--including collision, comprehensive (or theft and fire), and liability for injuries to others--you're covered for the same damages in a rental car. However, consult your insurance agent first, since coverage differs from state to state and conditions may apply.

Consider collision insurance. At the rental counter, you'll pay about $12 a day for the so-called collision damage waiver that will relieve you of any financial responsibility in case you're in an accident or return the car with a dent in the door. But what if you have collision protection on your car at home? If your car is worth about the same as the rental car, you can comfortably decline the collision damage waiver. If you own an older or less expensive car, be careful: Some companies only protect you up to the value of your own car. So if you drive a 2000 Toyota Camry that's now worth $15,000 and rent a 2002 model that costs $25,000, you may owe the difference if the car is a total loss.

To avoid that situation, check your credit cards. Most gold and platinum cards will cover collision damages if you use them to pay for a rental car. They'll pick up the whole tab if you have no other coverage, or they'll pay whatever your primary carrier doesn't cover. But there are caveats: Some cards offer this feature as long as the vehicle rental doesn't exceed 15 consecutive days. Many won't cover sport-utility vehicles, very expensive cars such as Rolls-Royces, or vehicles rented outside the U.S. File your claim more than 20 days after the accident and you may be out of luck. Also note that only some credit cards, and private auto policies, for that matter, will reimburse you for "loss of use," the daily rate the rental company will charge you for the time it takes to repair the car.

As for liability insurance, rental companies are required by law to provide the state's minimum limits at no extra cost. In Illinois, that would amount to $20,000 for each person in the other car up to a $40,000 maximum and $15,000 for the other vehicle. The extra $7 you agree to in the rental contract could get excess liability coverage of up to $1 million. But you can skip it if you have enough liability insurance through your own auto or umbrella policy.

Two other types of insurance offered to car renters are personal accident (about $3 a day), which provides life and medical insurance for the driver and the passengers in your car, and personal effects (about $1.25), in case something is stolen from the car. Before signing up, review the coverage from your existing homeowner's, renter's, and health insurance. Usually, your health or auto plan will pay medical bills resulting from an accident in a rental car. And unless you intend to transport extremely valuable items, you don't need personal-effects coverage. "Your homeowner's policy or credit cards would likely cover off-premises theft of personal items from your rental car," says Loretta Worters of the Insurance Information Institute.

Of course, if you don't own a car, a house, or a gold or platinum card, you'd be ill-advised to decline the rental company's coverage. In that case, you're better off paying $25 a day than the thousands it would cost if you totaled the car.

By Pallavi Gogoi

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