Don't automatically refuse extra rental car insurance coverage
Credit cards once offered blanket protection; policies now vary
By Michelle Crouch
You're standing at the rental car counter, and the agent is
urging you to buy the company's collision damage coverage, warning that your
personal auto insurance and your credit card protection may not cover all the
fees if you get in a wreck.
Before you brush off his offer, do your homework. The fact is, these days, he may be right.
Supreme Court case in September 2012, apparently the first to address the legality
of such fees, confirmed a rental car company's right to charge some of them,
including so-called loss-of-use and administrative fees. But that case is
binding only in Colorado, and many insurers and credit card companies still
refuse to pay
credit card companies are telling customers that they're covered, but that's
not always true," said Andrew Sutter, president of Orlando,
Fla.-based Total Fleet Solutions, which collects claims for rental car
will cover the vehicle but then they don't want to pay these other fees, and we
wind up in a major fight. At end of the day, it's the credit card consumer who is
on the hook."
What your card covers ... sort of
major credit cards come with no-cost rental car collision and theft protection.
All Visa, American Express, Discover and Diners Club cards marketed today have the
coverage, while MasterCard offers it to those at elite levels who have
The type of coverage varies, however. All Diners Club cards
and the Discover Escape card offer primary coverage, which means you don't have
to file a claim with your car insurance and there's no chance of a premium
increase. American Express customers can get the same benefit by paying $24.95
per rental period ($17.95 in California).
Other cards offer secondary coverage, which will
theoretically pick up the tab for anything your primary insurance doesn't
cover, such as your deductible, towing charges and other fees. If you don't
have personal auto insurance, it may even reimburse you for the entire cost of
Sound good? It's certainly better than paying a ridiculous amount for the rental car company's collision damage waiver. But you have to watch the fine print. To start with, to get the coverage you need to:
Decline the rental company's collision waiver.
Be the primary renter of the car.
Pay for the car in full with the card that provides the protection.
After that it gets more complicated, with exclusions, limits and requirements that vary by issuer (and which we spell out in our chart). For example, under most issuers, you probably won't be covered if you rent a pickup truck, drive the car in Ireland or keep the car for more than 30 days.
Gaps in coverage When it comes to the extra fees rental car companies charge on top of actual damage costs, whether you're covered is less clear. Kimberly Esquivel of San Antonio found that out the hard way when she and her family rented a car from Alamo in Orlando, Fla.
They say, 'We've got you covered,' but that's not true.
Rental car customer
Before they left, Esquivel said she called Discover to make sure she was covered, since she didn't have protection through her auto insurance. "The woman said, 'Just make sure you use your card to pay for it and you'll be covered. You won't have to worry about a thing,'" Esquivel recalled.
Of course, the worst happened. At SeaWorld, Esquivel backed the car into a pole. She reported the accident to Discover, sent them the necessary paperwork and put it out of her mind. Several weeks later, she got a bill for almost $1,000.
Discover had paid $3,000 to repair the car, but had refused to pay various administrative fees and a so-called "loss-of-use fee" for each day the car was in the shop and the agency couldn't rent it.
"It was very, very frustrating," Esquivel says. "They say, 'We've got you covered,' but that's not true. I'd been a customer with Discover for almost 20 years. That was the first time in 20 years that I really needed them, and they let me down."
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Fees and more fees In its fine print, Discover says it doesn't cover loss-of-use fees. (Alamo told Esquivel the customer service rep should have explained that when Esquivel first called.)
The other issuers say they do. That can be misleading,
however, because some pay such fees only if they can get a "fleet
utilization log" from the rental company showing it didn't have other cars
available to replace the damaged one. They say they shouldn't have to pay if
the rental agency isn't suffering any loss from not having the car on the lot.
Rental car companies disagree. They argue that they're
entitled to a loss-of-use fee even if they have plenty of cars on the lot. "When
you lose the ability to use something you own, you have the right to be
compensated for it, no matter what is happening with your other cars," said
David Purinton, president of PurCo, a Utah company that handles claims for
rental car companies and the defendant in the Colorado case.
As a result, most rental companies, including Hertz, Avis
and Budget, won't provide utilization logs. "We consider those logs to be
proprietary and confidential," said Hertz spokeswoman Paula Rivera.
That tug-of-war can leave you stuck with the bill.
fees aren't the only ones that cause problems. Diminution-in-value or
diminished value fees, designed to cover the inherent loss of value to the car
because it's been damaged, are becoming increasingly common and can add up to
thousands more dollars.
Claims administrators say they have noticed more disputes recently
arising over diminished value. They note that's partly because vehicle
history report services such as Carfax have made it more difficult to sell cars that have been
damaged, so rental car companies have become more vigilant about collecting the
"There may be 20 or 30 of the exact same Nissan Sentra at a rental
car auction, so of course if the car has been in an accident you're going to
get less," said Randy Harris, president of Khoury-Alternative Claims
Management, a third party administrator that specializes in car rental claims.
much none of the credit card companies are willing to pay it, so we have to
pursue the renter for it."
Another fee to watch out for: administrative processing fees,
usually a few hundred dollars. Most credit card companies say they'll cover those
types of fees as long as they're "reasonable," but that's the
problem. Who decides what's reasonable?
Should you buy the extra coverage? So does all this mean you should take the $15 to $25 a day collision damage waiver offered by the rental agency? Not necessarily. It depends what level of risk you're willing to take and what coverage you have.
call your primary auto insurance and ask specifically what your policy covers. Auto
insurers are required by law in some states to pay loss-of-use and other fees.
Others may cover some of those costs but only up to a certain amount, or offer
to sell you a rider to cover the fees, according to the Insurance Information
Institute. And a few insurers have negotiated contracts with rental car companies
that protect their members from specific fees. For example, Avis, Budget,
Enterprise and Hertz waive loss-of-use fees for USAA policyholders who use a
USAA discount code or book through USAA's website. So be sure to ask your agent
if your insurer has any similar deals.
Once you understand your auto insurance coverage, choose
carefully when selecting a credit card for a car rental. Use a card that offers
primary coverage if you have it, and ask your issuer how it handles
loss-of-use, administrative and diminution-in-value fees.
And you may want to consider this: Rental car claims
administrators in three different states told CreditCards.com that Visa has
historically been the most willing to pay loss-of-use and administrative fees.
"Visa is by far the best, and MasterCard is getting better,"
Purinton said. "I got a few denials just last week from American Express in
Colorado, even though that's where we won the court case. Obviously, the news
is still trickling down."
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