Insuring your rented vehicle


With the nation's tourism industry poised for a robust comeback, a fierce battle for rental car business is shaping up. Consumers will be the beneficiaries.

Also heating up is the controversy about damage-waiver insurance. When you rent, you need to decide whether to buy optional collision damage-waiver (CDW) protection, which increases your costs.

But these contracts relieve you of financial responsibility in the event of theft or damage to the vehicle in an accident. It is not a casual decision.

CDW is too expensive compared to traditional insurance rates, say those seeking to outlaw it. Also, they say, renters can be pressured into buying it, unaware that they may already have coverage.

Yet, car rental rates must increase if rental companies are barred from offering CDW, industry observers predict. The Federal Trade Commission agrees.

"Such a ban," in the FTC's opinion, would result "in some consumers having to bear greater costs primarily in the form of higher base prices than they otherwise might to cover the accident and theft losses statutorily shifted to the rental car companies."

Proponents of CDW argue that many renters would be forced to pay hidden costs for protection they already have from existing auto policies or credit cards. Today, most personal auto insurance policies provide coverage after payment by the renter of a deductible.

Policy-holders who rent with a major credit card such as Visa Gold, Mastercard Gold or American Express have secondary coverage. Their insurance company pays the damages and their credit card covers the deductible. Renters who use a major credit card and have no personal auto insurance are covered for the full value.

One possible solution to the CDW dilemma was introduced recently by Alamo Rent A Car. It offers an optional three-tier pricing system providing different levels of protection.

Alamo's new "Waiver Saver" program offers conventional maximum coverage for $9 a day; up to $3,000 coverage (which takes care of the usual deductible on a business rental) for $6 a day; and $500 worth of coverage (the usual deductible for a rented car on personal auto policies) for $3 a day. General Auto Rental followed Alamo's lead. Other companies are expected to do so.

Industry groups also note that CDW costs have been disclosed in car rental advertisements since early 1989, based on guidelines proposed by the National Association of Attorneys General and mandated by numerous state laws.

Results came swiftly that first year. In Florida, the world's largest car rental market with an average of 15 million transactions annually, complaints about car rental companies registered with the state's Consumer Affairs Division totaled no more than 100.

Supporters of a ban on CDW sales face growing opposition from small car rental companies that have witnessed the fallout from New York's law which limits renters' liability to $100 of damage.

"We're urging the legislature to change the law," says Richard Aronow, a director of the New York State Vehicle Renter Association. "Since it passed, the huge costs of replacing stolen or damaged cars have forced at least 60 small car rental firms in our state to raise rental rates or to shut down."

If you're planning to rent soon and have a personal auto policy, ask your insurance agent if it covers the full value of the vehicle you plan to rent. Check the size of your deductible and ask your agent if a rental car claim is likely to increase future rates on your policy.

If you don't have the right credit card or a personal auto policy and you reject CDW coverage, weigh carefully the risk you'll be taking against the money that you'll save.

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