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The Pros and Cons of Car Rental Insurance

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Your standing at the counter of the car rental company, and the agent asks the anticipated question “Would like insurance coverage?” Before you accept or decline the offer, take a moment to review the advantages and disadvantages of such a purchase.

Advantages of Car Rental Insurance

Despite what the word on the street may be, there are some decided advantages to purchasing care rental insurance, and they make this type of policy worth serious consideration. For example, car rental insurance (often called a Collision Damage Waiver or CDW):

  • Provides comprehensive damage coverage to reimburse you in the event that the vehicle is damaged. This means that if you are in an accident, you are protected against financial loss and having to pay for the costs of repair or replacement.
  • Keeps your insurance from going up in the event you need to use it. While you may be inclined to use the coverage provided by your personal auto insurance, your rates will go up if you have to use it to pay for damages to the rental car.
  • Delivers peace of mind knowing that you will not be hit with unexpected bills if there are damages. These policies will cover nicks, dents, dings, and damage that you will be liable for if they occur; and if you are driving in an urban area, the chances are great they will happen. Knowing you are protected removes one of the burdens of rental.
  • Protects you from yourself. Rental agencies can be very picky about what constitutes damage, and will charge you to repair what seems like the most inconspicuous mark – especially if you did not pay attention during the initial inspection.
  • It is quick, easy, and convenient as the entire transaction is handled by the car rental agency.

Disadvantages of Car Rental Insurance

As with so many things, the negatives accompany the positives. Some of the problems with Collision Damage Waivers include:

  • Redundancy – Your automobile insurance may already provide coverage for car rentals; why pay twice for the same coverage?
  • Coverage – The policy will only cover the driver(s) named on the car rental contract; if someone not named is driving at the time of the damage, you are financially responsible.
  • Exclusions – The policy may have conditions that will cancel or void the contract if there is an accident.
  • Lack of regulation – The laws regarding the sale of this type of policy are not the same as for personal insurance products, so you may not be able to get the answers or assistance you need.
  • The policy favors the insurer – Conditions and waivers in the policy may be to the advantage of company issuing the policy, rather than the purchaser.

While car rental insurance is optional, it is important to know two things: exactly what you are buying or turning down and what the consequences for accepting or declining the waiver are.

One final note

You do not necessarily have to purchase a car rental insurance policy from the car rental agency. If you would like this type of additional coverage, speak with your personal insurance agent, he or she may be able to provide the same coverage with rates and terms that are more favorable to your situation.

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