Resources & Insights

A Roadmap to Rental Cars and Insurance

July 20, 2017

No one likes reading the fine print in contracts, especially the ones you’re made to sign whenever you’re traveling for fun and want to get your rental car on the road quickly.

rental cars and insurance
CCIG’s Mike Rosser.

That fine print, however, can help you decide whether to pay extra – often a lot extra – for the coverage that the nice rental agent is pushing while the rest of the family is squirming to get going.

It’s tempting to wing it and politely decline. That, however, could end up costing you big-time.

There are two types of damage waivers that are commonly sold by rental car companies: Collision Damage Waiver (CDW) and Loss Damage Waiver (LDW). They’re often packaged together as CDW/LDW coverage.

Rather than trying to sort through things on the spot, you’re better off doing a little advance legwork before leaving for your trip.

A good place to start? A call to your insurance broker.

That broker should be able to help you quickly go through your coverage limits and let you know whether your coverage is adequate.

The conversation should answer your questions about whether you’re covered not only to repair any bodywork that might be needed but, a favorite of the rental companies, “loss-of-use.”

Many of us make the mistake that their policy, along with their credit card coverage, is all that they need.

The problem is that your credit card only provides “secondary” coverage, which kicks in only if you made sure to use the right card and after your auto policy has been exhausted. And while the better (and, yes, more expensive) credit cards will offer better protection, they generally offer nothing to address personal liability.

Credit cards also impose a few restrictions you’ll want to be aware of, including coverage that extends for just 15 days, excludes coverage in some countries (Ireland, Israel and Jamaica, among them), and excludes coverage for exotic cars and large vans.

Worse yet, you still may be on the hook for “diminished value,” which is the difference in resale value for a car before and after an accident.

And then there’s that “loss-of-use” issue, or the income the rental company loses while a car is being repaired.

There’s a lot of debate (and confusion) over loss-of-use, but Colorado happens to be one of the few states where the courts have ruled the car rental companies can, indeed, collect such damages.

Some insurance companies offer loss-of-use and diminished value coverage but most do not, so it’s important to make sure your broker can do business with the right carriers.

The bottom line? Recruit your insurance broker for their expertise. They can help you decide whether perhaps buying a “rider” makes sense or, depending on your household income, whether an umbrella policy is the better way to get your rental on the road with as little muss or fuss as possible.

Mike Rosser leads the Private Client practice at CCIG. Reach him at or 720-212-2068.

Also read: The Fine Art of Determining Value

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