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Dispelling Rental Car Coverage Myths

The season for summer vacations is here, which means many people will be renting automobiles for their trips.

By David D. Thamann | Updated on June 26, 2006

The season for summer vacations is here, which means many people will be renting automobiles for their trips. While the price of gasoline may weigh heavily on the traveler’s mind, the question of auto insurance coverage while driving a rented car is usually not enough to keep people at home because the standard personal auto policy provides liability and physical damage coverage. However, FC&S subscribers still have questions pertaining to rental car accidents. Should the claim be handled by the renter’s personal auto insurer or by the rental company’s policy? Also, should the loss damage waiver offered by the car rental company be purchased?

The answer to the first question seems simple enough. The standard personal auto policy provides liability and physical damage coverage for rented cars, but these are noted to be in excess over any other collectible insurance since the rented cars are not owned by the named insured. This means that, as the owner of the rented cars, the rental company should provide primary coverage, either through an insurance policy or through self-insurance. But in fact, car rental agreements sometimes can interfere with this simple prescription. Consider the following legal cases.

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