Two calls that can save you money before you rent a car
If your vacation plans this summer call for renting a car, add two brief phone calls to your preparation checklist: one to your insurance agent and another to your credit card company. You can save yourself time and money and buy yourself some peace of mind.
Being armed with information also can help you with the drill at the rental car counter, which usually consists of a conversation that includes such phrases as “optional coverage,” “collision damage waiver” and “loss damage waiver.”
A car rental counter is not the place to be making important financial decisions.
Many leisure travelers choose a rental car company’s “insurance,” said Neil Abrams, president of Abrams Consulting Group, a research firm for the car rental industry based in Purchase, N.Y.
“The leisure traveler, being less sophisticated, will take it to be safe, not knowing if it is necessary or not,” he said.
Before you decide, you need to know what that “coverage” consists of.
Collision damage waiver, or CDW, and loss damage waiver, or LDW, are essentially the same. The rental car company is saying, in effect, “OK, you can take this car, and if you damage it we will not hold you personally responsible -- if you purchase this product.”
Here’s an important truth about a waiver that customers need to know:
“It’s not insurance; it’s a waiver of responsibility,” said Abrams. “It holds the customer harmless for damage or loss, providing there is no negligence.”
Negligence might include leaving the keys in the car, leading to theft, or taking the vehicle where it is not permitted, such as off road or to a foreign country. Your coverage may be voided if you break those rules.
That “coverage” comes at a premium. CDW/LDW costs from $9 to $35 a day, depending on the company and type of car. Typically, the less expensive the car, the cheaper the coverage.
CDW/LDW does not cover you for damage to other vehicles that you may be liable for. That is liability insurance, which you can buy separately. It is sold by the rental car agency and, as a third-party product, is actually insurance. It costs $10 to $13 more per day.
Enterprise, the largest car rental agency in the U.S., charges $15 per day for its optional coverage (it calls it Damage Waiver, or DW, although it’s the same as CDW/LDW) and $10 per day for supplemental liability insurance for a subcompact Chevrolet Metro. Toss in personal accident insurance for $11 per day (which provides the renter and passengers with accident medical expense, accidental death and ambulance expense benefits) and that is the annual equivalent of $13,140 for insurance on a vehicle worth about half that.
At $36 a day, your rental cost could more than double for coverage you may not even need. By comparison, full coverage on my 1999 Ford Explorer is only $800 per year, or $2.20 per day. (I get a break because I do not live in the heart of Los Angeles.)
Why is rental coverage so expensive?
Whereas your insurance company has your claim history, motor vehicle records and other data, “I don’t know you other than general customer information,” Abrams said, explaining how rental car companies view customers. “At the end of the day I have to hold you responsible.
“But,” he added, “you don’t have to take [the coverage] if you don’t think it is a value.”
The key for travelers is to know what they need.
“There is a duty on the part of the consumer to understand what this is and know before you rent your car. Don’t assume. Know specifically what your policy covers,” Abrams said. “Armed with that information, then you can make a decision about what is best for you.”
You may already be covered. “Many auto insurers’ policies cover you in a rental car, so it’s worth learning whether or not yours is one of them,” said Justin McNaull, spokesman for AAA, one of the largest U.S. auto insurers.
I did just that. I called Steve Smead at State Farm Insurance in Santa Paula, my insurance agent, and discovered that my auto insurance covers me in a rental at the same levels as if I were driving my own car.
What it doesn’t cover is something the car rental companies call “loss of use.” That is the amount of revenue the company loses while the vehicle is unavailable to be rented. If it takes a week to get the car repaired after an accident, the company can charge you for a week’s rental. I could add rental car coverage to my policy for $32 per year and be covered for loss of use.
“Every insurance carrier has different polices, so it is important to confirm for a fact that you are covered,” said Smead, an insurance agent for 25 years.
Also check whether your credit card offers rental car coverage.
“Many credit cards, especially when you get into gold and platinum cards, offer coverage as well,” said AAA’s McNaull.
In my case, Visa coverage includes physical damage and theft of the covered rental vehicle, loss of use and towing charges. The list of what is not covered is long and includes personal liability, loss or theft of belongings, and injury to anyone or anything other than the rental vehicle. It acts as secondary coverage to my automobile insurance, which means that Visa will pay my deductible if I have an accident, but my automobile insurance picks up the bulk of the tab. You can also check what your Visa card coverage includes at www.visa.com/benefits.
MasterCard coverage is explained at www.mastercard.com/cardholderservices/guidetobenefits; American Express at www.americanexpress.com/cards/benefits.
Between my auto insurance and my credit card, I am, like many others, more than adequately covered. Yet Abrams estimates that as many as a quarter of the customers of companies that target leisure travelers will purchase the coverage.
“Some people need it, some don’t and some take it for peace of mind,” said Abrams, who takes the added coverage when he is in a foreign country. “The individual will judge whether it is good value.”
Jane Engle is on assignment. James Gilden can be reached through his e-mail at www.theinternettraveler.com. Write Travel Insider, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail travel@latimes.com.
