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Ya' Want Insurance With That?

IRWIN KRAMER: When you rent a car they are going to offer you the opportunity to buy additional insurance coverage. Sometimes you think well wait a second am I covered under my personal auto insurance policy?

JOHN DOETZER: In many personal auto insurance policies if you have physical damage insurance on the vehicles that you own and operate then you have an automatic extension of coverage for vehicles that you rent on a short term basis in your own personal name.

IRWIN KRAMER: You are even covered when you drive that vehicle south of the border into New Mexico.

JOHN DOETZER: Most personal auto policies have the New Mexico extension endorsement for liability coverage when you go across the border.

IRWIN KRAMER: But do not take to the Autobohn thinking that you are covered under your personal auto policy.

JOHN DOETZER: No, Europe is completely different. The European laws vary by country. There is no extension of liability for claims that occur over in Europe, particularly if they are litigated in Europe.

IRWIN KRAMER: If you are in Germany and about to take the wheel you need to take the additional insurance they will offer you at the rental agency.

JOHN DOETZER: All of the rental car agencies in Western Europe will provide what they call minimum limits coverage which is the minimum limit required by the host country that you are in. What you will want to do is to encourage them to tell you what the cost will be to increase those limits and how high can you buy.

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A Collision Damage Waiver (CDW), in states that allow it, is an optional charge of $9 to $13 a day. Rental car agents may urge you to buy this option. Although they call it "collision damage" coverage, it's not technically collision insurance. Rather, it's a "guarantee" that the rental company will pay for damages to your rented car. By declining the waiver, you accept responsibility for any damages. However, under CDW, the company won't pay for bodily injuries or damages to your personal property. If you do not buy CDW coverage or are not covered by your personal auto insurance policy, you could be liable for the full value of the car. Some rental companies may hold you liable only for the first $1,000 or $2,000.

Some CDWs exclude coverage under certain circumstances. So, coverage may be revoked if you damage the car when driving it in a negligent manner, on unpaved roads, or out of the state in which you rented the vehicle. Some companies void their CDW coverage if a driver drinks alcohol or if a non-authorized driver operates the car.

The coverage offered by rental car companies may duplicate insurance you have through your auto and homeowner's policies. Coverage under your medical plan would offer protection that CDW coverage lacks. Read your insurance policies and medical plan for specifics. If you're not sure about the coverage, call your insurers. If you're traveling on business, your employer may have insurance that covers you. Also, some credit card companies and motor clubs provide members with free rental protection when you use their cards to pay for rentals.

In addition to CDW coverage, a rental car company also may offer:

  • Personal Accident Insurance (PAI) - pays a death benefit and a portion of your medical expenses if you're in an accident
  • Personal Effects Coverage (PEC) or Personal Effects Protection - safeguards your luggage against damage. If your homeowner's policy covers your luggage and other belongings while you travel, you may not need this protection
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