May 11, 2017

Does My Auto Insurance Follow Me When I Rent a Car?

I can't tell you how often I've heard this question. And the answer is yes ... AND no!

The first thing to keep in mind about your PERSONAL auto insurance is that the broadest coverage applies to the cars you own and insure on the policy. While coverage does follow you automatically when you drive certain types of cars you don't own, that coverage is limited. However, most BUSINESS auto insurance policies do NOT follow the business or its employees when driving non-owned cars unless the business has specifically purchased this coverage.

The second thing to keep in mind is that when you rent a car, you sign a contract. That contract contains all kinds of terms and conditions and, if you don't read the contract, you don't know what they are. If you don't show the contract to your insurance agent, he or she doesn't know what they are, either. Regardless of whether you or anyone else reads the contract, you are still bound by its terms once you sign it!

I've read LOTS of auto rental agreements and ALL of them include terms that surprise most people who sign them, such as:
  1. You agree to be legally responsible for anything that happens to the car, or resulting from the car, during the term of your agreement--even if you would not otherwise be legally responsible under law (and even if you're not driving it)
  2. You agree to replace the car at a value determined by the rental car company if it is destroyed  (this includes numerous fees and charges the rental car company also determines)--although your auto policy usually only provides coverage at book value, which is generally much less than the amount demanded by the rental car company
  3. You agree that your insurance policy will pay first, before all other insurance policies pay, in the event of a claim--even though the auto policies in most states say they'll pay AFTER the rental car company's policy pays first

So, what does this mean? Here are some examples of the three points I just mentioned:

  1. You're driving the rental car and are the middle car in a 3-car accident. Although the person who hit you from behind is legally responsible for your damage and damage to the car it pushed you into, when you signed the rental agreement, you agreed to be responsible for the damage to your rental car and the car you struck.
  2. Your rental car is torched while parked in the lot at Disney World. The rental car company says the car's replacement value is $33,000 but the insurance company says it will only pay the car's actual cash value (i.e., book value) minus your deductible, or $21,000. You signed the contract, so you're legally responsible for the $12,000 difference.
  3. In most states, your auto insurance company will not make payment for damage to the rental car until AFTER the rental car company's policy pays first. It will eventually pay, but it could take months...
Trust me, the rental car agreement contains other provisions that disagree with your auto policy--these are just three of the big ones. Have any questions, ask away--either by making a comment or submitting the question form.

In my next post, I'll talk about the things you can do when driving a rental car that VOID the agreement and expose you to exclusions on your auto insurance policy...

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