Rental Car Insurance


Three recent revisions in rental-car contracts have significantly increased the renter’s portion of the risk.

The first is “diminution of value” whenever a rental car is repaired.
This represents the reduction in a vehicle’s market value due to its having been in a accident. When the repaired car is eventually sold, it brings a lower price. When a renter returns a vehicle in damaged condition, he or she receives one bill for repairs and another for diminution in value. Most auto policies cover most of the repairs, but few cover diminution of value.

The second is “before and after,” a method of determining the renter’s responsibility when a car is substantially damaged.
Where diminution of value is a concern when the rental car company repairs a damaged car, before and after addresses a situation where the car is sold rather than repaired. With some types of damage, liability concerns make rental car companies reluctant to return a repaired car to the fleet. Instead, they simply sell the damaged car for salvage. They then charge the renter the difference between the market value on the day of rental (“before”) and the amount the car brought at the salvage auction (“after”).

Here’s an example of how the “before and after” clause could bite you:

Say you rent a car with a market value of $25,000 and bring it back damaged. The cost of repairs, loss of use (the amount the rental car company loses because they can’t rent the car out) and appraisal fee is $$7,500. The rental car company chooses not to repair the vehicle but to sell it at a salvage auction, where it brings only $11,500. You would receive a bill for about $13,500, or the difference between the before and after values. Your auto insurance would pay only the repair costs, leaving you with a balance of around $6,500. Most insurance policies do not cover “before and after.”

The third is loss of income.
If you wreck their car, it’s not available for them to rent out while it’s in the shop being repaired. They might try to charge you for the rental income they could have collected had the car been on their lot (even if they have extra cars on the lot). Again, most insurance companies do not cover this peril.

Unless you’re a real gambler, our advice is to purchase the loss damage waiver offered by the rental car company. It’s really the only way to obtain full coverage on a rental car