Insurance agents often advise their commercial clients that it is safest to purchase the collision damage waiver from rental car companies instead of relying on agent provided Hired Auto Physical Damage. The reason is that Hired Auto Physical Damage (which typically costs $250 per year) will only pay the cost to repair the car or the actual cash value in the event that the car is totaled. However, the rental car contracts also make the lessee responsible for the difference between replacement cost and actual cash value in the event the car is totaled, diminution of value in the event the car is repaired, and loss of profits while the damaged vehicle is out of the fleet. None of these additional charges are covered by Hired Auto Physical Damage. Thus, the common recommendation it is safest to buy the collision damage waiver from the rental company at a cost ranging from $12 to $28 per day.
However, this may not always be the best advice upon closer examination of the terms of the collision damage waiver coverage. To follow are common loopholes in these contracts:
* Authorized Drivers — Coverage is only extended to the authorized driver who signed the rental agreement. Other drivers must be added for an additional charge per day that can significantly drive up the cost of the coverage. If an unauthorized driver is involved in an accident, the collision damage waiver typically will be voided.
* Under The Influence — Coverage can be voided if he driver was “under the influence of intoxicants, drugs or any other substance known to impair driving ability”. This wording is much more severe than being above the legal blood alcohol levels for DUI. “Under the influence” could mean one beer or drink or the use of certain sinus headache medicines.
* Violation Of Any Traffic Law — Coverage could be voided if any traffic law was violated during the accident.
* Driving On Unpaved Roads
* Leaving Keys In The Car And Resulting Theft
Based on these potential problems, it would seem that the safest course of action would be to purchase Non Owned And Hired Auto Liability and Hired Auto Physical Damage from your own insurance agent plus the collision damage waiver from the rental car company.
Source: CIC Resources, Winter 2009; Car Rental Contracts And Conundrums; Bernie Neff