Another Pandemic Issue: Does Your Adult Child Need Rental Car Insurance?

Those of us who live in the Tri-State area typically use cars as our preferred means of transportation and carry automobile liability insurance on our vehicles. When we are traveling and rent a vehicle for personal use, we may decline the vehicle insurance offered by the rental car company because our personal auto insurance covers rental vehicles.

What about your adult child who lives in Chicago or New York and doesn’t own a car, as is the case with my daughters? Due to the pandemic, they may have chosen not to fly home for a visit and will be renting a car instead. Or maybe they will rent a car in the Tri-State area. Perhaps you as the parent always handled the auto insurance for them when they lived at home. Does your adult child understand that they need certain types of insurance before driving that rental car?  How much insurance do they need? 

Insurance Sold by Rental Car Companies

Rental car companies typically offer the following types of rental car insurance for travel within the United States and Canada (but not Mexico):

  1. Collision/Loss Damage Waiver
  2. Liability coverage, also called Supplemental Liability Insurance or SLI
  3. Personal effects coverage
  4. Personal accident coverage

Collision/Loss Damage Waiver:       

A collision/loss damage waiver (also known as an LDW or CDW) isn’t technically insurance. With this waiver, the rental car company won’t pursue you for repairs and losses, including the rental company’s loss of use of the car while it is being repaired. The waiver typically does not cover damage from gross negligence, speeding, driving on unpaved roads or driving while intoxicated and typically does not cover lost, damaged or stolen keys/remote entry devices, towing or tire damage (unless related to an accident). The cost for this damage waiver varies by rental car company, with costs between $20 to $37 a day. Please note that if you ask a rental car agent for “insurance” at the rental counter, you will likely be offered the collision/loss damage waiver but not liability coverage as described below.

If you rent a car through one of the big online travel agencies such as Expedia or Priceline, the agency may offer you the option to buy “collision coverage” for around $10 a day. Coverage is provided by a third-party insurance company such as Allianz. The cost is a lot less than from the rental car company but if you damage the car, you have to pay the rental company up front for the damages to the car, then file for reimbursement under the policy.

Liability Coverage/Supplemental Liability Insurance:

This insurance covers you if you damage other vehicles, persons or property while driving the rental car. By law, rental car companies must provide the state required minimum amount of liability insurance coverage on the rental car.  In Ohio, Kentucky, Indiana, New York, and Illinois, the state required minimum insurance is:

  • $25,000 for all claims for bodily injury/death of one person,
  • $50,000 for all claims for bodily injury/death for all persons as a result of any one accident, and
  • $25,000 for property damage (to other’s property) as a result of any one accident ($20,000 in Illinois).

I am not comfortable carrying only the state required minimum amount of liability insurance when driving any vehicle. Supplemental Liability Insurance provides the renter and authorized drivers with up to as much as $1,000,000 combined single limit for third party liability claims ($2,000,000 in some jurisdictions). If the renter obtains SLI, the rental car company provides third party liability protection up to the applicable state required minimum and an insurance company provides excess third party liability insurance coverage from the applicable minimum to up to the policy limit. The cost for this coverage varies by rental car company, with costs between $14 to $16 a day. I would consider this a small price to pay for this much peace of mind.

Personal Effects Coverage:

Personal effects coverage may help cover your personal belongings, such as your laptop or clothing, if  stolen from the rental car. If you have renters or homeowners insurance, the personal property coverage on that policy typically helps cover your personal items through what’s known as “off-premises coverage.” This coverage costs around $6.00 to $7.00 a day, but may be unnecessary.

Personal Accident Insurance:

This insurance is typically sold together with Personal Effects Coverage. Personal accident insurance helps pay your and your passengers’ medical bills, if you’re injured in a rental car accident.

Insurance Offered Under Credit Cards

You may be asking – what about the rental car insurance offered by my credit card issuer?  Many credit cards provide “free” collision coverage for car rentals, provided you use the card to pay for the rental. A few premium credit cards offer primary collision coverage, meaning the card takes full responsibility for the payment. (But coverage on most cards is secondary, meaning if you have your own auto insurance, the card picks up only what you can’t first recover from your own insurance.).  Also, you still have to pay the rental company up front for the damages to the car, then file for reimbursement from your card issuer.

When to Get Additional Rental Insurance

Even if you have an automobile policy, you should consider getting insurance from the rental car company in the following instances:

  • Your current policy doesn’t have comprehensive and collision coverage (e.g. due to the age of your car),
  • You’re only insured under a commercial car insurance policy, and/or
  • You don’t want to risk paying a high deductible on your own policy

Also, if you’re driving a rental car abroad (apart from Canada), your current car insurance probably won’t cover you. Check your policy to find out.

Uninsured Family Member Driving Your Car

A final issue to consider is whether a visiting family member driving your car is covered by your auto insurance policy. When your child lived at home, he/she should have been listed as an insured on your policy in order to ensure coverage under the policy. Now, if an uninsured family member is visiting and has permission to use your car, your auto policy should cover any accident caused by that person. This assumes the family member’s license is not revoked or suspended and he/she is not listed as an excluded driver on your policy.

Most insurers advise that you check with them regarding coverage for anyone driving your car that is not specifically named on the policy. Some policies may not extend full coverage to someone who is not named as a listed insured on the policy. Also, if you are using a small, low cost insurer, your insurance may not extend to anyone other than the policyholder.

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  • About the Author

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    Fern Goldman

    Fern Goldman has extensive experience representing clients in real estate, commercial, and corporate transactions.  Before joining Wood + Lamping in 2017 Fern worked for large and medium-sized regional firms as well as serving as senior counsel for PNC Bank. While there, she provided legal services to the bank’s lenders and senior management, located throughout the Tri-state area.

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