Essential facts about rental car insurance policies

A car rental agency is naturally protective of its assets. People may not drive as carefully in a car they don’t own, leading to accidents. Because the agency needs the damage repaired or the car replaced, they usually recommend that renters purchase their provided insurance policy.

When renting a car, however, you may wonder whether you should purchase this policy or whether your existing policy will cover the rental.

“The answer is yes and no,” said State Farm Agent Pam Hansen Alfred. “Do you rent in the United States? At State Farm, we do not extend coverage to any country except Canada and 25 miles into Mexico. Otherwise, the way it works is if you have comprehensive and collision coverage on one vehicle, that coverage will extend to the rental car if you have a claim.

For example, Alfred recently had a client whose rental car was stolen, a situation that a comprehensive policy would pay after a deductible. Likewise, if you were in an accident or your windshield was damaged, the cost of repairs would be covered after paying your deductible.

Beyond these situations, however, there are a few unique areas of car rental insurance you should discuss with your agent to make sure you’re covered.

Loss of use

Although your insurance covers damage to your rental car, you may have to pay other expenses if a car rental company suffers a loss of use.

“If you destroy a vehicle and they can’t rent it, they charge you for the time you spent in the store as if you were still renting it,” Alfred said. “This cost would not automatically be covered by your car insurance. But you can add coverage as part of your State Farm policy called Non-Owner’s Automobile Liability and Property Damage. The load is fairly nominal. If the car rental company wants to charge you for loss of use, your policy will cover that if you have this endorsement on your policy.

Decreased value

A second potential gap in rental car insurance, diminished value, could become critical.

“The scenario is that you destroyed your rental car and your insurance company fixed it,” Alfred said. “Let’s say you caused $5,000 in damage to the rental car. But rental car companies don’t keep their vehicles for very long, and when they go to auction them, the auction house says that car isn’t worth as much because it was destroyed and repaired. This is when the car rental company turns around and charges you for the diminished value.

Luckily, you may not even need to involve your insurance company, as your credit card company can come to the rescue.

“Major credit card companies like Visa, Mastercard and American Express have the advantage of recovering diminished value,” Alfred said.

One of Alfred’s clients experienced this situation. The diminished value was $19,000 and the customer’s credit card company covered the full amount.

Avoid a franchise

Even if you want your own car insurance to cover a rental, you can also buy the rental company’s insurance to avoid paying a deductible or to avoid filing a claim against your personal insurance in the event of damage.

For more information on the ins and outs of rental car insurance or to get an auto insurance quote, visit or call 406-453-6010.

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