Is car rental insurance a scam?

By | October 20th, 2012

Allen Friedman says he declined the optional insurance when he rented a Chevrolet Impala from Dollar Rent a Car at Denver International Airport recently.

So when Friedman, a retired dentist from Sarasota, Fla., returned the vehicle a few days later, he was surprised to see an extra $215 for insurance and $53 for “roadside assistance” added to his bill – charges Dollar insisted were legitimate because it said Friedman had signed an agreement asking for the additional coverage.

Friedman’s complaint is the basis of a lawsuit brought against Dollar in federal court in Colorado by lawyer and consumer advocate John Mattes, who says hundreds of other car rental customers have faced similar fraudulent charges.

Dollar says that the claims are without merit. “We deny the allegations and intend to defend the case vigorously,” says Anna Bootenhoff, a company representative. The company declined to answer questions about Friedman’s bill.

But according to the lawsuit, which is seeking class-action status, the rental company brushed Friedman off with a form response. When he disputed the charge on his credit card, Dollar wouldn’t budge. It showed his credit card company a signature that it claimed was his. When Friedman finally obtained copies, he realized that his signature had been forged, Mattes alleges in the complaint.

Friedman eventually got his money back after his credit card company sided with him and reversed the charges. But others aren’t so lucky. Mattes says he has a file of complaints from other car rental customers who verbally opted out of extra services but then found them on their final bill. Faced with a form-letter rejection from their car rental company, they gave in and paid up.

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“I truly find it difficult to believe that anyone would forge a signature – ever,” says Sharon Faulkner, the executive director of the American Car Rental Association, a trade group. As a former owner of a Dollar franchise, she says no one ever accused her employees of forgery, although some customers complained that they were sold something they didn’t want.

“If the renter was truly upset and apparently confused about their decision, I would reduce their rental so they were satisfied with their final bill,” she told me. “If it meant either removing coverage they realized they did not want or reducing their rental fees to make them return again to do business with me, then I always decided that was more important.”

What’s the source of this conflict? Mattes says it has to do with how companies make money and compensate their employees. Like other travel companies, car rental firms derive a significant portion of their profits from “upselling” optional services such as insurance, roadside assistance and fuel-purchase options. Car rental employees, he says, are often paid the minimum wage but offered a generous commission – as high as 12 percent – from the sale of those extras. That gives employees an incentive to strong-arm customers into taking the insurance and, if they don’t, to forge their signatures, he says.

“Insiders have told me that if employees fail to obtain an average level of upsells per month, they may be terminated,” says Mattes.

Those allegations aren’t new. This class of dispute, which I call the “sign here” scam, was plaguing car rental customers when I started mediating travel disputes, in the 1990s. Back then, car rental customers were issued contracts printed by a fuzzy line-printer and were told that the contact was the same one they’d agreed to when they made their reservation. Only later would they find out that they’d initialed the square to buy insurance they didn’t want or need.

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In recent years, technology has made this ruse even harder to detect. Contracts today often are signed electronically, through a touch pad at the counter. That favors the car rental company, which could conceivably forward any e-signature to a credit card company that’s contesting a charge. (And if Friedman’s allegations prove to be true, they have.)

Most frustrating, perhaps, is that even if Friedman prevails against Dollar, the effects on consumers would be minimal. Car rental firms are routinely fined by courts for consumer-unfriendly practices, but because the industry is not federally regulated, it can ignore any ruling except in the state in which it’s made.

As the case against Dollar notes, this is not the first time the company has been accused of deceptive sales practices. In a 1989 California case, Dollar was accused of instructing its workers to aggressively sell optional products in return for high commissions. An appeals court sided with consumers.

Until the federal government – either by legislation or regulation – steps in to put an end to these “gotchas,” they are likely to continue, even if Friedman wins his case. In the meantime, you can benefit from the artificially low car rental prices subsidized by drivers who are talked – or tricked – into buying services they might not need.

Always read whatever you sign. Otherwise, you could end up in court.

online surveys

  • The easiest way to avoid this is to sign up for the frequent renter loyalty program. It’s effectively free. And for the most part you bypass the strong arm upselling tactics as your car is waiting for you.

    And if you are concerned, a la Chris, that you might not rent from the cheapest place, sign up for all of them.

  • BryanDrost

    Chris, you mention that any company could forward an electronic signature from a touchpad to anybody they wanted. I personally don’t think I’ve ever thought about this before, but I can see an unscrupulous company who got called out by a consumer doing this. The question I pose is as follows: are we as consumers obligated to sign on that touch pad–in other words, do I legally (whether by federal, state, local law) or even contractually (based on the agreement I sign with my credit card company or even the agreement credit card companies have with the establishment) have to sign on the pad–can I just use a ballpoint?

  • I would think that it would be impossible for an individual agent to manipulate the electronic signature.

  • Cybrsk8r

    I’m not sure how that is a guarantee they won’t try something. If they’re desperate enough to resort to forgery, they can do that regardless of whether you’re physically there.

  • TonyA_says

    It looks to me that the common denominator to all bad hospitality or travel related services that do not care for its customers is private equity ownership and management style. This type of business people do not really care about customers, or employees, or the long term reputation of the business since they are only in for the short term and make a quick buck. Next time take a good look at where your 401K is investing.

  • mszabo

    Seems like the company could easily require you todo whatever they want in that regard. If they required you to balance a teapot on your head to rent a car they wouldn’t that still be within their legal rights? You always have the option of not renting. I’d say the real question is what exactly does signing one of those touchpads imply for a long contract like a car rental. How does that signature get associated with a document in any legalish form?

    If say Hertz tells my credit card company this digital signature was associated with agreeing to extra insurance, I would be easy enough for me to create a digital document with their CEO’s signature (easily found here: to say they also agreed to waive all charges for my rental.

  • MarkieA

    I’m not sure of the answer to your question, but I am sure that if you decide to not sign the touchpad, the car rental agency has the right to not rent you a car.

  • emanon256

    I had to vote no, I don’t think the insurance is a scam. I think the sales people are scamming people, but for people who legitimately choose the insurance, the insurance itself is not a scam.

    As far as applying the e-signature to other items, that would be just as illegal as forging the signature. I have implemented a few e-signature capture systems and the requirements the lawyers have always outlined are that a message must be displayed, and the users signature must be captured along with the actual text displayed at the time of the signature. The text must outline exactly what the user is agreeing to. And the text and signature must be captured in the same record in the database with an audit and date time stamp and the record must not be updatability without triggering the audit (i.e. if someone manually changed the text, it would update the text date time stamp and would be out of sync with the users signature, and would capture the user who updated it).

    Thats how I do things, I am not saying all companies are that throughout or that legal. But I always want to protect both the consumer and the customer.

    Edit: Added returns between paragraphs.

  • Richard Gordon

    We have rented from Hertz and Avis for years.
    Never take the insurance.
    Never had any problem.

  • Nigel Appleby

    It’s not just the process of selling that’s a scam in my opinion, the price they charge which is scam because it’s so outrageously high.

  • BillCCC

    I am not sure what is meant by scam? The rental insurance is just insurance, you either buy it or you don’t. If you are talking about the methods by which some companies use to get the customers to pay for the insurance, it is a scam in that sense.

  • EvilEmpryss

    I can’t answer the survey question as asked because your article doesn’t address it. Is the insurance itself a scam? No, not if it covers a driver as promised in the case of damage to the car. Even if someone has personal insurance that covers rentals they might not want to deal with potential rate hikes if they have an accident that has to be claimed against it. I know my insurance probably won’t cover the full price of a high-priced Mercedes so I’ll opt for the rental insurance for the day or two I have it if I ever rent one.

    Are the tactics used to *sell* the insurance a scam? That is quite possible. I’ve been pressured before by the counter clerks, and I won’t sign or initial anything I haven’t read and make sure my copy of the contract says what their copy says, but I can see people in a hurry (or just less savvy) being tricked into it.

    The insurance itself isn’t the problem, it’s the corporate climate that encourages that high pressure sales tactics that needs to be changed.

  • Interesting question. I think you might be able to ask for a traditional paper contract, although I’ve never heard of someone opting out of the electronic one.

  • The survey and the story are not related. See my FAQ answer on poll questions:

  • William_Leeper

    Easily doable, yes, morally right, and legal, no! I understand what you are getting at though! When we as consumers stoop to their level we are no better than they are!

  • cjr001

    “I truly find it difficult to believe that anyone would forge a signature – ever,””

    If car rental companies hadn’t already already been caught at about every other scam and underhanded tactic imaginable over the years, then this quote might hold some merit.

    I won’t say car rental insurance itself is necessarily a scam, but the tactics that some places get you to sign up for said insurance often is.

  • cjr001

    They don’t need to manipulate the signature itself, just attach it to a document you haven’t viewed or to a different version than you think you are ‘signing’

  • GNRMatt

    I had something very similar happen to me with a rental through Hertz in Munich, Germany last month. I declined the car insurance (as I get it through my AMEX) and the person behind the counter added it on after the fact. I didn’t notice the charges until a few days later and when I went to return the car at the airport, I was pretty emphatic, but polite, about needing that charge removed. The person at the airport was quite nice about it and took care of it on the spot, so I’m happy about that. However, the person at the original location where I picked up the car (in the center of Munich) was just dishonest. It’s a shame that people like this exist, but I’m not sure what can really be done about it.

  • I generally decline the insurance when I rent, as I use American Express and my understanding is that when you rent and pay for your car with the American Express card, it augments your personal car insurance to pay for anything over what your car insurance pays for in the event of an incident with a rental car. Can you comment on that, Chris?

    And I agree with some above comments – the insurance is not a scam if it does what was promised. It’s extremely expensive, however, and when you factor in the cost of the insurance it can double the cost of the car rental in some cases …

  • emanon256

    I have a post below about the e-signature requirements I have implemented at clients . But as far as opting out, I always put a process into place so that a customer can use a paper contract in the event of a system failure, or if they choose not to use an electronic agreement. Its rare that it occurs, but I always provide a business process for these contingencies. Whether or not the end users get trained on them is another story.

  • emanon256

    I had a hotel forge my signature once. It was a horrible forgery too. It was the JW Marriott in Phuket if anyone was thinking about going there. They added a lot of charges after I left, for days I wasn’t there, they would not respond by e-mail. When I disputed the charges, they sent documentation to my credit card company with the forged signature.

  • JimDavisHouston

    Friedman got a copy of his contract when he rented the car. Does his copy say “Declined”? I would think this is a “no brainer”.

  • EdB

    I’m wondering if it was because, and I’m guessing here, you were a foreigner and the original agent thought your insurance wouldn’t be valid.

    In any event, adding on after the fact is illegal, at least here in the US, and dishonest agents like that hurt the entire brand. I only rent from Hertz when I have a choice because I have had nothing but great service from them. When you hear about someone like this, it hurts the entire corporation.

  • Guest

    First of all, any rental agent who has a customer sign accepting insurance when the customer has made it clear they want to decline, is Dishonest and deserves to be fired.

    That being said, rental car insurance is not a scam. I currently work for a major car rental company at a high volume airport location. Before thAt, I worked at a branch inside a dealership where 89% of our business was loaner cars for dealership customers. Many of these customers would literally have the car for a few hours. Another little known fact that is never publicized on this or other websites is that when a third party (dealership, insurance co., etc.) pays for the car rental, credit card damage waiver is void. Seems like $18 for one day of CDW is better than paying your deductible+loss of use+admin costs+diminished value…

  • Many standard signature programs (Adobe, Microsoft) have a software lock on them that invalidates the signature if the document is changed. That said, an internal program or document could easily be modified.
    I usually make my reservations ahead of time and PDF the reservation. Then I store it on my smart phone. So at the minimum, I have a copy of the original agreement. It makes it harder for companies. They would have to prove that I changed my mind from the original reservation. Even if they had a so-called signature, the fact that the original didn’t have those terms calls things into question.

  • Cybrsk8r

    I’m not sure what you’re talking about. A lot of cards will pay your deductible. Amex has a program, which you have to sign up for, it’s not automatically included with the card, which acts as primary collision insurance on a rental vehicle, for about 30 continuous days, and up to $52,000 value. The limits may have changed since the last time I looked them up. The price is a flat $24.95 regardless of the rental period or vehicle type, subject to the previously mentioned limits. Once you sign up, the insurance kicks in automatically when you use your AMEX card at a rental agency. So if you’re renting for two or more days. it’s a better deal than the rental agency insurance.

  • MSRowan

    It IS a scam. Read the fine print on the back of what you sign. At Avis it says that even when you opt for and pay for their insurance if you damage their car, they reserve the right to bill you and or your own insurance company. They don’t list any reason, such as a damage cap or type of car for the reason to double bill, it just says they have the right and when you buy the insurance you are agreeing to that.

  • JenniferFinger

    In and of itself, car insurance offered by rental agencies might not be a scam, but if they’re deceiving or strong-arming customers into paying for it when they don’t want to, then I think it’s fraud or other slimy practice and that it needs to be stopped.

    I wonder though: does one’s car insurance on one’s personally owned vehicle cover rentals as well? I was always under the impression that it did and that buying it with a rental isn’t necessary unless one doesn’t have other car insurance. I could be wrong though so I welcome clarification.

  • Miami510

    I once fell victim to the forgery of my signature and since that time have added a number after my signature which is “connected to,” but not the date of the contract. Anyone attempting to forge my signature on a subsequent credit card slip or contract would copy the number by which I could prove it wasn’t my signature.

  • Dutchess

    I voted yes, not because the insurance itself is a scam but because the way it is sold and how scamy that is.

  • The other day I rented a car in Vegas. I declined all insurance options as I usually do. As I was signing the rental agreement I noticed that the price they had at the bottom was slightly different than the price I was quoted online. Then, I looked through the boxes I had just checked, and noticed one of them was for roadside assistance. I asked them to reprint me a new rental agreement. Make sure the price you agreed to online matches what you sign for at the counter and carefully read what you are initialing or checking off on these tricky and evasive agreements.

  • y_p_w

    You’d be subject to the terms of your own insurance, including coverage limitations and deductibles.

    I remember renting a car after an accident. My insurance company arranged for the rental and specifically instructed me to decline any insurance from the rental agency.

  • The answer is, it depends. Some personal auto policies cover rentals, some don’t. You’d have to read your particular policy to know for sure. Even if it did, there might be another reason for taking the insurance – if your personal policy has to pay out a claim on a rental, it’s pretty much guaranteed that your rates are going up. Some people decide that spending $50 for a couple of days of insurance is better than the potential surcharge that you’d be paying for up to 3 years if something went wrong.

  • I actually did what I should have already done, I looked it up on Google. It’s pretty much as you say – beyond that my card includes the car rental insurance as part of the deal. Basically it picks up the tab for damage to the car up to a pretty sizable limit. It covers NOTHING beyond the car, however. If you damage someone else’s car, or someone else, that’s not covered. To qualify you have to reserve the car with the AMEX card and also PAY for it entirely with the card.

  • BMG4ME

    I agree with EvilEmpryss – your article is about this particular instance of car insurance. Rental Car insurance itself is not a scam although clearly this instance is given that there appear to be hundreds of similar occurrences.

  • Ann Lamoy

    That’s exactly why I voted yes.

    Many people don’t know that they are probably covered under their own car insurance and won’t need additional insurance. And with the way rental companies push it on them, and sometimes scam them? The whole thing is a scam.

    People should check their car insurance polices before they rent and know if it will cover rentals. And if their credit card companies will cover the deductible or anything else. (And also don’t forget to take pictures of the car pre and post rental).

  • Every location I’ve rented from that uses the touchpads has provided a printed copy of the signed rental agreement before I’ve left the counter. Surely you’re entitled to ask for one if it’s not immediately offered. You should ALWAYS review the printed copy before leaving the premises; if it doesn’t jive to what you think you signed up for, you can get it corrected before leaving. I didn’t one time, and got burned on an extra $15/day upgrade that I didn’t mean to accept.

  • MarkKelling

    Rental insurance might not be a scam if it pays what you think it will, but many of the car rental companies have begun adding restrictions to what used to be the no-questions-asked coverage. And they don’t go out of their way to let you know.

    Some have deductibles now, some have maximum coverage amounts that might not equal the value of the car (important if the car is stolen and not recovered), and all now say they will not pay if they determine the damage done was willful and not accidental. The last one is the real kicker. What is truly accidental damage could easily be claimed to be willful by the car company meaning you or your insurance will have to pay.

    Gone are the days of off-roading your compact car through the Grand Canyon and returning it with a smile on your face telling the rental agent “Good thing I got the optional insurance!”

  • The LDW says that you are absolved of all responsibility as long as you were using the car appropriately. Where do you something different? That might be interesting.

  • @cjr001:disqus
    Most enterprise level programs give the front line employees extemely limited power to make any changes. Plus, the signature should have sufficient metatags associated with it that unless the manager is a hacker, associating a signature with another document should be well beyond the skills of anyone not in the IT department, certainly beyond the skills of someone at the retail level.

  • If you have a claim, it doesn’t matter whether you file it to your regular auto policy or the one you bought at the car rental as far as it affecting your rates. Claims, and sometimes just phone calls that don’t end up as claims, are reported to an agency called CLUE and the next time your policy is up for renewal, your insurer will usually order a CLUE report and it will show up.

  • The forgeries that we have seen occur when the rental agency tricks the customer into signing a contract with different terms and conditions than what was originally agreed to.
    The beauty of signing up for the frequent renter program is that you sign one master agreement, often in the serenity of your home, without pressure from greedy salepeople. When you rent a vehicle, you do not sign a new agreement. At least not at airport locations for Hertz, Budget, and Alamo. The exception is when you make changes to the rental agreement, in which case a wet or electronic signature is obtained.
    However, if you don’t make changes, the car rental agency, would have a much harder time claiming that you made a change since the don’t have a copy of your signature.
    Even if the agent printed out a fake contract and signed your name, it would have two huge problems. One, the contract would be internally time stamped which wouldn’t match when the car left the lot, unless the agent was really lucky, and two the signature wouldn’t match yours.

  • Rental car agreement were clearly written by some sadistic attorney. The contract that I get printed out when I leave Hertz is about 5 pages of small type. Anything could be printed on it.

  • I agree with Evil Empryss, all car rental insurance is not a scam. In Ireland you have to take it and are glad; the roads are so narrow the cars come back with one side covered in scratches from the bushes. Best to use a credit card that offers insurance coverage so you can decline the rental company’s coverage most of the time.

  • llandyw

    Some have made comments regarding he contracts, with one mentioning they keep a PDF copy of it on their phone. Your best bet is to print 2 copies of the contract and take it with you. Insist the clerk use the contract as is. Have the clerk sign both copies and you keep one. This way there is no way they can contest anything should additional charges show up.

  • jim6555

    Technically, car rental insurance is not a scam. However when the car rental companies set up compensation plans which provide incentives for their employees to cheat the public, then it looks like, feels like and smells like a scam.

  • mszabo

    Well I wasn’t exactly thinking of stooping to anyone’s level. I’m honestly curious what a digital signature in this context actually means. For a paper signature, certainly it is meaningful to see my name in ink at the end of a document agreeing to terms. For something you are signing that on a simple touchpad where you can’t even see the document at the same time it seems pretty meaningless.

    Now there is such a thing as a Digital Signature which is secure but it has nothing todo with actually signing your name on a touchpad and involves an encrypted key you associate with the document.

  • Joe_D_Messina

    The point is, given the way your page lays out they should be related because it’s confusing to the reader when they’re not. Lots of sites have random polls, but they’re in the sidebar or somehow set off from the main content of the page. But here with them directly following the article, they naturally should be on the same topic to avoid confusion. You know I love your work, Chris, but rather than constantly pointing people to your FAQs to answer this very common question, wouldn’t it make a lot more sense to simply acknowledge that your current site layout pretty much dictates the article and poll be on the same topic?

  • Guest

    This is flat out wrong. At my car rental company, if a customer brings back a car damaged and CDW was purchased, we file an internal accident report, but it goes no further. Insurance companies use CLUE to share info; if nothing goes to an insurance company, nothing will appear On a clue report. The fact that CDW is not insurance but rather an agreement between the rental company and renter to not hold the renter responsible for damage is integral to this argument.

    By contrast, credit card CDW policies are usually underwritten by insurance companies. VISA uses Indemnity Insirance; AMEX has its own insurance co. Since most, but not all, credit card CDW is secondary, you risk your rates going up even if your deductible is paid by your credit card company.

  • Annie

    I have found Enterprise to be all about hard-sell. I’ve rented from them in Las Vegas and their employees work hard to strike fear in you so you jump at the extra insurance. I’ve mentioned these tactics when I return the car (they always ask how everything was) and once received a 10% discount off the final bill.
    Recently I’ve used Dollar and Budget and neither of them, so far, has been hard sell — their indifferent employees point to the document and say, initial here to decline coverage.
    The solution – side step the rental agencies and get your own coverage. You can get a non-owners policy for like $10/month from 4AutoInsuranceQuote. Sure beats the headache of paying $50/day from a rental agency for insurance.

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