Along with Mary Hunt (who, by the way, wrote in Woman’s Day the very first piece featuring my consumer advocacy), Ed Perkins who writes for SmarterTravel is one of my consumer heroes. Mary and Ed both write about all kinds of consumer issues, and today’s column is a big kudos to Ed.
As I’ve stated in the past, I prefer to lean on my own auto insurance plan to cover me when renting a car and expressed the reasons why concerning my decision. On the other hand, Ed Perkins believes differently about collision damage waivers (CDW), even though this particular type of insurance can cost more than the actual rental itself. After reading his reasons today, consumers can make an informed choice.
When you buy a CDW, the rental company no longer is able to charge for damage to a car rental in most cases, except for a few exceptions, such as tire damage or gross negligence. Really and truly, no matter how banged up the car could be, you walk away free and clear, and no other method is as comprehensive or convenient. While I always use my own insurance, others may employ a credit card with insurance or a third-party policy. Unfortunately, we have to pay a damage claim up front, then recover all (or as much as we can) by filing a claim afterward. This could lead to a circumstance where we might have to charge boo-coos of money on a credit card upon returning the damaged vehicle and being unsure if we’ll get all that money returned. If we don’t buy CDW, rental companies can charge for more than just fixing the damage. They also charge for:
“Loss of use” – The rental company sets the potential revenue lost while the car is out of service being fixed (even if the company had lots of other cars available!). Worse, they generally figure that daily loss at the full retail rate. By the way, American Express, MasterCard and Visa all offer “loss of use” coverage with rentals paid for with most of their cards.
Towing charges – You are unable to drive the car back to the return station.
“Diminished value” – Potential loss of the car’s resale value (because of your damage) when the rental company disposes of it, usually within two years.
Administrative fees associated with the claims process.
Most of my and your non-CDW car rental insurance will cover those extras. However, often coverage depends on cooperation from the rental company – and they may decide to be UNcooperative.
You should never get behind the wheel of a car without liability protection, which usually comes with household, homeowner, or tenant insurance and covers much more than a car rental. Many folks buy an umbrella policy covering a million dollars or more. As a matter of fact, when my attorney incorporated Ellen’s Poison Pen Inc., he advised this policy for me in case of a major liability issue. Even though the company is currently non-operational, the annual umbrella cost is so indecently cheap that I’ve maintained coverage over the years.
Car rental companies in most countries are required by law to include liability insurance. Required coverage in the US can be extremely low (usually only the minimum required by the state) and usually even cheaper in Europe. My advice still is to make sure you’re covered 24/7 with your own insurance so you can forget about the rental company’s overpriced insurance.