Going on vacation? That is awesome!
With so many people traveling this summer it is important to understand the ramifications of renting a car. When renting a vehicle you sign a rental agreement that clearly states it is the renter's absolute responsibility to pay for any damage to a that vehicle. You can satisfy that provision two ways:
1. Purchase the Loss Damage Waiver (LDW) from the rental car agency.
2. Use your own automobile insurance policy to cover the damage to the rental vehicle
(if you have collision and comprehensive coverage on your own policy).
The LDW is NOT insurance. It is a change in the rental agreement waiving the renter’s
responsibility to pay for damage to the rented vehicle. You pay a daily charge for the right to
waive that responsibility. There are restrictions on that waiver, meaning it can be voided if the
vehicle is used in an unauthorized manner. Some of those restrictions are:
1. Carrying more persons than there are seatbelts in the vehicle
2. Driving while impaired by drugs, alcohol or other substance
3. Operating off road
4. Allowing an unauthorized driver to operate the vehicle.
I just want to make the point again that if an unauthorized person drives the vehicle and the car is damaged the LDW is voided. People who are authorized to drive are listed on the contract when you pick up the car. For example, if you were to have a parking attendant park the rental vehicle and that attendant is not listed on your rental contract any damage done by the attendant is not covered by the LDW. In this case you would be completely liable for any damages.
Using your own policy can save a substantial amount of money in rental charges. The rental car is considered a replacement of your own vehicle and the coverage on your personal vehicle transfers to the rental, provided that vehicle is not being used while you are on vacation. You must have collision and comprehensive coverage on your own policy to pay for damages.
Under all circumstances when you rent a car you must make sure that the people who are
authorized to drive your own personal car are authorized to drive the rental vehicle. This
provision applies to both liability and collision and comprehensive coverage.
The one area that is not covered by personal automobile insurance is the reduction in value if the rental car is damaged and the car is sold instead of repaired. Your automobile insurance policy covers “direct” physical damage to the vehicle. The reduction in value is “indirect” damage and is not covered.
People who rent vehicles can purchase Supplemental Liability Insurance (SLI) through the rental agency, which is insurance. Normally what is offered are the minimum state required limits in this state in which you are renting the car.
Purchasing the rental agency liability coverage usually does not include medical payments or
uninsured and underinsured motorist. That means your own policy would provide coverage in
instances where uninsured or underinsured motorists are involved or medical payments are
necessary.