Who Pays For Damage and Injuries in a Rental Car Accident?

Fielding (or fending off) the rental car agent's offers of insurance coverage is a time-honored tradition at the rental counter, but what happens if you get into an accident?

When you're renting a car, at some point you'll be asked whether you want to purchase certain types of insurance -- whether the coverage is for you, your belongings, or the vehicle itself, in the event of a car accident. Of course, each of these coverage options adds a daily charge to the overall cost of the rental, and you may not be certain whether you need any of them.

Even if you have a clear understanding of what's covered under your own car insurance policy, it's not always easy to recall details in the moment. So, you either take your chances and decline the offered coverages, or you decide to play it safe and purchase some or all of them. Either avenue can lead to some serious second-guessing. So, let's look at a few key issues to understand when it comes to liability and financial responsibility for a rental car accident.

Understand Your Own Car Insurance Coverage

Knowing what your auto insurance policy covers -- and does not cover -- when you rent a car will help you make the best on-the-spot decisions about additional coverage when you're standing at the counter.

In general, if your own car insurance policy includes collision and comprehensive coverage, liability coverage, personal effects coverage, and medical coverage (all subject to applicable limitations and deductibles), most of the coverages offered by the rental car company will be unnecessary. However, there are certain circumstances that may make additional insurance a good idea, at least for the rental period.

If You Have Minimum, Liability-Only Coverage

In many states, vehicle owners are only required to carry liability insurance, at relatively low levels, in order to register and drive a vehicle. If you purchased a car insurance policy that only provides liability protection -- coverage only kicks in when you cause an accident, and it only covers injuries and vehicle damage sustained by other people, in other words -- and no "collision" or "comprehensive" coverage, then your own car insurance policy won't cover damage to the rental vehicle.

Note: The credit card you use to reserve and pay for the rental might provide coverage for damage to the vehicle. Check the fine print of your card agreement, or call the servicer.

Renting in a Foreign Country

Your auto insurance policy may not apply to damages and injuries when the rental car accident occurs in a foreign country. When you travel internationally, it is particularly important to determine coverage exclusions in advance of your trip. If no coverage exists, you will definitely want to obtain the additional insurance offered by the rental car company.

Deductibles and Coverage Limits

Even though your own insurance might apply to a rental car accident, your policy may contain deductibles and limits of liability that would still expose you to significant out-of-pocket expenses in the event of an accident.

For example, you may have a collision deductible of $1,000, meaning you would be responsible for the first $1,000 of repairs to the rental car if you made a claim under your policy; in contrast, the collision coverage offered by the rental car company may have no deductible at all. If you prefer the peace of mind of knowing that you can avoid paying a $1,000 deductible by spending a few extra dollars per day for the rental car company's collision coverage, you may choose to add this charge to your rental contract.

What's the Best Strategy?

Your primary goals in assessing your coverage needs should be twofold:

  1. making sure you have adequate and complete coverage for all potential damages (espescially costly injuries), and
  2. avoiding the unnecessary duplication of coverage between your own auto insurance policy and the additional coverages offered by the rental car company.

If you are going to err, it is better to do so on the side of having too much coverage, because the money you spend to buy additional insurance at the rental counter will likely pale in comparison to the financial exposure you will face for uninsured damages, losses and injuries.

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