Is car rental insurance a rip-off?

If you’ve rented a car, you probably know the look. It’s the one Bonnie Jones got when she picked up the keys to her rental car in Las Vegas recently.

The car rental representative appeared “very concerned,” says Jones, who owns a beauty supply business in Albany, Calif. “She said that there was a lot of reckless driving around Las Vegas and she would be very nervous without the full insurance if she were renting a car there.”

It was enough for Jones to pay an extra $21.99 a day for loss damage waiver coverage, which relieved her “of all financial responsibility” if she damaged the car, as long as she followed the terms of her rental agreement.

Is insurance really that expensive? No, but that hasn’t stopped car rental companies from charging – and profiting handsomely from – optional coverage.

About 8% of the car rental industry’s revenue comes from sales of optional coverage, according to Chris Brown, the executive editor of Auto Rental News. It’s a growing market, observers say. Car rental companies are developing new insurance products and selling them more aggressively to boost profits. They’re also pursuing every damage claim, in part to encourage future renters to buy their coverage.

But with just a little advance planning, you can avoid a confrontation at the rental counter, not to mention overpaying for your policy. Insurance, which is not required on most rentals in the United States, is available from several sources before you pick up the car. The latest twist: a new site that lets you buy a discounted policy at the last minute.

Rental customers already have a choice of insurance options. They include coverage offered by their credit card or through their regular car insurance policy. Even online travel agencies offer option coverage – on Expedia, you can buy $35,000 worth of collision damage protection for $9 a day when you book your rental car, which is a significant savings from the counter price.

But for those of us who fail to plan – and let’s face it, that’s most of us – a decision about insurance isn’t made until you get to the counter. And that’s where they can get you.

A new site called Insuremyrentalcar.com is trying to throw a wrench in the spokes of the rental company’s moneymaking machine. Its plan: to undercut car rental companies and online agencies with less expensive policies. Rates start at $5 per day, as well as per-trip policies that start at $17.50 or annual policies for $94. The policies offer loss damage waiver coverage of up to $100,000, and can be purchased from six months to one day in advance.

“More than half of car renters opt to purchase the insurance at the car rental desk,” says Ernesto Suarez, the CEO of Insuremyrentalcar.com. “We’re giving them another choice.”

That’s the issue faced by Patricia Genthon when she rented a car in Denver recently. If she wanted coverage, she’d have to pay an extra $240. As an insurance adjuster from New Orleans, she knows the value of having a good policy. A quick online search led her to Insuremyrentalcar.com. “They wanted $28 for 30 days,” she says. It was essentially the same policy.

Within five minutes, Genthon was the proud owner of a new car rental policy. Because she’s in the insurance business, she read the paperwork carefully to make sure it wasn’t too good to be true, and everything checked out.

But she understands how renters might be reluctant to buy last-minute coverage online. “The average consumer assumes the rental companies would have the best product and if they had an accident all would go well,” she says. “They think, ‘if I used their company they would go easy on me.'” That’s not always true.

Jones, the renter from Las Vegas, never had to use her policy. She safely drove straight to the desert, where reckless drivers “aren’t a big problem,” she says. Now she makes sure she’s covered before she rents a car in hopes of avoiding a hard sell at the car rental counter. That’s a good roadmap for the rest of us.

Is car rental insurance offered by auto rental companies a rip-off?

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How to avoid the insurance hard-sell

Make up your mind before you arrive. Don’t wait until the last minute to insure your rental car. The time to decide is before you reach the rental counter, and preferably at the time of your booking.

Bring evidence of coverage. If you have insurance through your auto policy or credit card, check to make sure you’re covered in the country where you’re renting and for the vehicle type. You may be asked for proof of insurance, so bring a copy of your policy.

Know your rights. A basic familiarity with the country’s car insurance regulations can be helpful and can let you offer a definitive “no” when someone tries to get you to buy insurance. AutoEurope publishes a helpful list of regulations which includes insurance, at autoeurope.com/go/driving-information/.

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