When renting a car, I never know whether to take the extra insurance offered by the rental company. Do I really need this, or are they just trying to fleece me? I have some car rental coverage through my credit card, but I don't know if it's enough. Would you please shed some light on this? - Nancy in Vancouver
You're not alone; many of us are unsure about insurance. How many times have we all seen - or been - the person in line at the rental car agency calling our auto insurer or credit card company to check our coverage?
Most of us don't have enough money to pay for the damages we might cause while driving, so a certain amount of insurance coverage is mandatory. On top of this, you can purchase optional coverage. But what, and how much, do you really need?
"When you're about to rent a car and the person behind the counter gives you the hard pitch and a scare story - the 'You know, I had someone last week, they smashed up the car and just walked away because they had our coverage,' - it's an emotional sale, and sometimes it's tough to say no," says Moshe Milevsky, finance professor at the Schulich School of Business at York University.
"But I find that in some cases, you're triple-covered, especially if you've rented a car with a credit card, and you have your own car back home with a comprehensive enough policy," says Milevsky, who is also the author of Your Money Milestones: A Guide to Making the 9 Most Important Financial Decisions of Your Life.
If you're relying on your credit card to cover your rental, note that they usually only offer coverage for damage or theft of a rental vehicle. You must check the fine print.
The vehicle types eligible for coverage are usually limited to minivans, cars and SUVs. Credit cards also have an upper dollar value limit on the vehicles they cover. You'll want to check the length of the rental period; most are valid for short-term rentals only, and have an upper limit on the number of days. To be eligible for rental insurance through your card, you must decline the collision/loss damage insurance offered by the rental company, and pay for the rental with your credit card.
If you decline the rental vehicle company's coverage, and you don't have coverage through a credit card or private plan, you'll be fully responsible for any damages to the vehicle. If you do have an accident, you'd be lucky to walk away with just a cracked bumper. If another party is involved, you may be liable for their injuries and damages.
"Third-party liability covers you if you seriously injure or kill another person, or damage property. In B.C., ICBC is the government insurer, and it's mandatory insurance, so every rental vehicle here in B.C. would at least carry the minimum $200,000 liability - but that will vary from province to province. But, is $200,000 enough? Absolutely not," says Heather Prizeman, senior product manager for auto insurance with the British Columbia Automobile Association (BCAA).
If you own an insured vehicle in British Columbia, providers typically offer optional packages that include rental-vehicle coverage. These packages typically offer extended liability in the $1-million to $2-million range. ICBC offers an additional coverage that drivers can purchase through either the RoadStar package or RoadSide Plus.
If you belong to an automobile association, it may also have coverage. "At BCAA, we offer Advantage Auto, our member exclusive optional auto insurance. For a low annual fee, you're covered for unlimited number of times you rent a car in North America, to a maximum number of days per rental," says Prizeman.
If you don't own a car, or don't have optional coverage, you can purchase standalone rental vehicle policy coverage for a specific trip. ICBC, for example, offers this for $10 a day, including collision, damage and $1,000,000 third-party liability. Typically, this is less expensive and more comprehensive than rental company offerings.
So don't just say yes at the counter; you'll likely pay a premium for inadequate coverage. Relying on your credit card alone is also hazardous.
If you have a car, check with your personal automobile insurer to ensure that you and all other drivers have adequate third-party liability, personal injury and damage to property coverage. If you don't, add optional coverage for rentals. If you don't own a car, shop around and purchase the best standalone coverage you can find.
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