Thursday, May 7, 2009

"Should I buy the insurance when I rent a car?"

This is a question we are frequently asked by our Personal Auto clients. The answer is not always an easy one, especially for anyone insured on an automobile policy here in New York State (now there's a surprise).

One important fact applicable to a person who is covered under a Personal Auto Policy (PAP) in New York is that by law there is automatic coverage for loss to a rental vehicle included in their policy per state law. It includes any amounts, including the loss of use of the rental vehicle, the renter is liable for damage to the rented vehicle and regardless if the vehicle is rented in or out of NYS as long as it is in the covered territory of the United States, its territories and possessions, and Canada.

Now getting back to the question, our answer is .... Yes! We encourage our clients to purchase the insurance from the rental company, also known as the Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)

I can hear you know "Jamie why should I buy the CDW/LDW at anywhere from $8 to $20 a day if I already have coverage!" My simple answer is "The Headache" factor. How much of a headache do you want to have in the event you do have a loss with a rental car? I suspect your answer is going to NONE! Well I can not promise you none, however if you buy the CDW/LDW I can promise you a lot less hassle and that translates to a smaller headache.

Let's examine a hypothetical claim scenario. Please keep in mind this scenario assumes both drivers have a New York State Personal Auto Policy. If you are insured in another state or you are renting the vehicle for business you will need to check your specific coverage related to rental cars.

Jane and her family just enjoyed a wonderful yet long day at the Magic Kingdom. They survived the cramped monorail ride back to the TTC and subsequent tram ride out to Minnie 23 only to find one of the other fine patrons of the "Happiest place on Earth" has backed into their rental van with his rental. The whole front end is smashed in and it is not drivable.

Jane puts a calming hand on her husband's shoulder to contain his outrage; then digs her contract out of the glove box to locate the 800 number she is supposed to call if something like this happens. Stuart on the other end answers and listens carefully to Jane's tale of woe. When Jane finishes, Stuart happily reminds her that she (over the objections of her husband) wisely purchased the CDW/LDW and thus they will be showing up shortly with a truck to pick up her damaged vehicle. They will also be there with a replacement vehicle (of similar or larger size as typically stipulated in the CDW/LDW contract) so she can be on her way to the hotel. As Jane ends the phone conversation with Stuart, she notices Phil, the other driver, is on the phone with his rental company and his conversation is steering in a significantly different direction.

You see Phil did not listen to his wife and thus did not buy the CDW/LDW from his rental company, after all he already has a PAP. Phil is informed his rental company will be showing up with a truck to take the damaged vehicle, but he will likely have to get a cab back to the hotel and come to the rental company to settle the damages and to fill out another contract for a new vehicle. Phil hangs up and calls his insurance company to inform them of the accident. They let him know they will need to have an adjuster go out an look at the car and negotiate with rental company for the damages. The next day Phil has to take a cab to the rental company, which means he is not with his family(who also had to take a cab) at EPCOT. He is told when he gets there that they already have an estimate for the damage and they want payment. Phil calls his insurance company to tell them the situation. Phil's insurer insists they want their adjuster to see the estimate and the vehicle. He spends the next several hours on the phone with the insurer and the rental company trying to get the matter settled. He then has to arrange another vehicle and unfortunately they do not have any min-vans left, just compacts. Phil dutifully drives the compact to EPCOT to pick up his family. While they are trying to figure out how they are going to fit all the stuff and everyone else in the car, Phil looks up and spies Jane and her family walking to their new mini-van after a fun filled day TOGETHER at EPCOT.

So who do you want to be...
... Jane or Phil?
Pick your headache.


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