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.”

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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/.

22 thoughts on “Is car rental insurance a rip-off?

  1. Is it overpriced? Yes! A rip off? If it covers damage to the car no.

    It’s the same thing as paying rack rate at a hotel, you can get the same thing cheaper if you plan/do research ahead (as Chris mentions).

    1. Jim, agreed.. Given that we’re taking about an asset that can have a value (albeit depreciated) in the tens of thousands of dollars, I don’t see this a a rip-off as you do have options and (in most cases) is not a mandatory item and one that as the business, I can make a clear case for why it’s offered.. and done so at higher prices to reflect the last-minute walk-up timing.

  2. You MUST also make sure you have decent liability coverage. The Rental Car company will have only the minimum required by law. If you do not have your own insurance (or your own insurance will not provide liability protection for your particular rental), you are up the proverbial creek (the Creek of Bankruptcy) without a paddle if you cause a serious accident.

      1. Of course they can.

        Certainly a clear vehicular liability case would be fairly straightforward to get enforced in most countries friendly to the US. (Such as Australia.) It of course involves more paperwork to collect on a judgement in a foreign country, but by no means is it impossible.

        1. really ?
          How ?
          & that would surely cost heaps.
          Maybe if driver killed someone, but for damage to a car, forget it, even if you wrote it off.
          Any Australian getting a letter form some dodgy U.S. law firm would just laugh & tear it up.

  3. Each consumer has to decide what their peace of mind is worth. If you have no other coverage you might feel that the cost is reasonable.

    1. Peace of mind is worth a great deal, but these policies really are overpriced for the amount of coverage, since identical coverage is available elsewhere for a fraction of the price.

      1. True, but considering the time value of money, no doubt there are some people who would rather not spend the time ahead of time to find a policy and try to decipher the contract language and would prefer to sign and drive at the rental counter. It’s not for you or me, but the casual once a year renter who picks up a car after flying in for vacation may value the option.

      2. I agree they are, to me, overpriced.. but that (overpriced) is a totally different matter in my mind, to that of being a rip-off – the term used here.

        The word I’d prefer to use is “value” or the comparison of what you get, relative to the price point you pay for it. Like you, I find walk-up, counter-paid rental agency CDW a low value proposition.

  4. One point that isn’t mentioned here. If your credit card’s policy covers car rentals, you must DECLINE the rental agency’s policy in order to benefit from the credit card’s policy. I have benefited from this in the past and, fortunately, can compliment the insurance agent’s courteous coordination of the claim from the other person’s insurance company.

  5. In almost every case where I have rented a car in the past few years, the rental company offered insurance coverage has been more per day than the amount charged for the rental (California seems to be the exception because of state laws limiting the price). It is very overpriced compared to what is available elsewhere especially what you likely pay for your own personal insurance.

    But you do have to look at the fact that many people mistreat rental cars in ways they never would think of treating their own. I have know several business coworkers having the attitude that they paid for the insurance so they will get their money’s worth out of it (most of them are no longer coworkers). The $20 – $30 a day is not going to cover the cost of major damage.

    What is more disturbing about the rental company offered insurance than the price is it does not appear they actually repair any of their vehicles damaged by renters who have paid the insurance except in cases where the vehicle is unsafe to drive. How else do you explain all of the scratched dented and otherwise damaged vehicles they rent out where they try to get the current renter to pay for previous damage?

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  6. It wouldn’t seem to be too difficult to call your auto insurance company before you take a trip and find out if and for what you are covered. One call would do it, and that would be all that would be necessary for any trips you take for as long as you have the same policy. The cost of insurance at the rental desk is obscene (eg., $21.99/day = $8,026/year!), and is far in excess of any reasonable cost.

    1. no one is holding a gun to your head & saying buy it or else (but it is America you say, land of the gun)

      1. What a rude reply and not helpful nor enlightening. The issue isn’t that rental car insurance is a rip-off…the issue is rental car insurance offered by rental car companies a rip-off? And the answer is yes.

  7. The happy combination of the car rental discount plan from an organization to which I belong, my credit card, and my auto insurance company gives me the confidence to decline extra coverage.

  8. is it a rip off-
    no. i once hit a dead deer in the middle of a snowstorm (it was lying down, i was following the plow, i was stupid to try and go around the plow). I felt a series of crunches as the underside of the car was totaled. I was 30 minutes away from the hotel.
    I called Alamo, as usual i got full, over priced coverage, they offered to send a tow truck, but if i could make it back to the hotel they would also send a FREE REPLACEMENT CAR. Luckily the snow off set any overheating and my car made it.

    This was 100% my fault but because i had their coverage there were no hoops to jump through and my car was waiting for me the next day.

    what would happen if I didn’t have THEIR insurance? i would bet you anything Alamo would not be so helpful, they would probably say “go call YOUR insurance, see of they can send a tow truck.”

    this is why i always get their over priced insurance. If nothing bad happens, yes it’s a rip off- but in an emergency it can be a blessing.

  9. One thing to check with credit card coverage is whether there is any liability coverage, there are several, in Canada anyway, where the card will cover collision only and then only if you pay for the rental with the card. So you are on your own for comprehensive and/or liability. Having to pay, say, $30,000 for a totaled car would hurt, but being on the hook for a large liability claim would really hurt. Some years ago there were apparently some rental car outlets which did not provide any liability with the car and several people who relied on their credit card got caught – very nasty.

  10. “They’re also pursuing every damage claim, in part to encourage future renters to buy their coverage.”
    I think this part is a stretch at best… Sure, this idea seem to fits the circumstances that exist, but to me is wholly unfounded. Could it be an intentional effort on their part? Yes, it absolutely could… but… It could also be the company is now making a better effort to collect damages to their assets done by or occurring while under the control of the customer.

    To me, the way this is phrased seems to be a stated fact when, as I’ve read the article, no evidence is provided to support this claim.

  11. The worst part is being in line waiting for ages as you watch the people in front of you being scammed, you feel like you want to save them, and of course you feel frustrated because it’s also your time they are taking up in trying to sell it. Thankfully our company has free gold service with Hertz and our plan includes insurance so I never have to be have the discussion about whether I want insurance or not.

  12. was under the impression that basic 3rd party property insurance was part of any car rental in OZ. The option would be to reduce the excess(deductible in U.S. language).
    3rd party personal insurance is part of any vehicle registration in OZ.
    Be careful driving SYD to Gold Coast. For much of the way it’s one lane each way.
    At least you can thrown away any speeding tickets you get in OZ. Don’t think they can pursue you threw credit card used for car hire YET in OZ.

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