Car Rental - Insurance / Waivers

Insurance / Waivers

Although frequently not explicitly stated, US car rental companies are required by respective state law to provide minimal liability coverage, except in California, where the driver is solely responsible. This covers costs to a third party in the event of an accident. In most states, it is illegal to drive a car without liability coverage. The rental car companies maintain liability insurance on their vehicles; however, some companies will charge for this, should you not provide your own insurance. As an example, in Maryland, the minimal level of liability coverage is $20,000 for bodily injury and $15,000 for property damage.

It is typical, when renting a car, to be offered various forms of supplemental insurance and/or damage waivers as an optional extra at additional cost. There are several types of coverage:

• Loss Damage Waiver (LDW) – sometimes also referred to as Collision Damage Waiver (CDW) - covers the costs of damage to the rental vehicle in the event of an accident. In some countries the purchase of LDW covers all costs after an "excess" fee has been paid (e.g. all costs are covered after the first $500). Often a "Super" insurance product is available which makes this excess amount zero. Note that LDW/CDW coverage is not insurance and does not offer the same coverage as a damage insurance policy.

• Supplemental Liability Insurance (SLI) – a product often sold in the USA which provides coverage in the event of an accident causing bodily injury or property damage to someone other than the renter and passengers.
• Personal Accident Insurance (PAI) – covers medical costs and accidental death for the renter and passengers in the event of an accident during the rental.
• Personal Effects Coverage (PEC) – insures against risk of loss or damage to the personal belongings of the renter (and sometimes the members of the renter's family while traveling with the renter) during the period of the rental.
• Excess Insurance – When a car is hired in Europe, Africa, Australasia, and most of the Middle and Far East, CDW, Theft and Third Party Liability are generally included in the car rental price. There is almost always an excess (also referred to as Super CDW, Non Waiver or Deductible) on the CDW and Theft portions of the rental. A higher excess usually results in a lower premium on the insurance. Excess is used to discourage drivers from making insurance claims for small damage. If the damage is cheaper to repair than the excess then generally the driver would not claim and the insurer is saved the cost of the repair. The Excess can range from about £500 to £1,600 and is the portion of the loss that the renter is responsible for, regardless of which supplemental insurance / waiver products have been purchased. Excess is just starting to be charged in the USA, it is sometimes charged in Canada, and it is generally charged in the Caribbean, Central and South America. Excess insurance is a secondary insurance (only in place with the CDW and SLI cover) and provides coverage to the renter for the excess amount. The majority of car-rental companies in Europe will sell this cover as a 'top-up' insurance to cover the excess on their standard damage and theft insurance. Not only can this work out quite expensive, it is likely to exclude cover for damage to the windscreen, bodywork, roof, tyres or undercarriage leaving the hirer of the vehicle liable to pay out if damaged. There is however, another insurance alternative that can reduce these risks and costs. Specialist excess protection insurance from a number of other insurers can offer excess protection, much broader coverage and may include cover for those areas often excluded. In the event that the vehicle is damaged or stolen, the rental company will charge your credit card for the excess amount and you then claim for reimbursement on your vehicle hire excess protection policy.

In the USA, the sale of these supplemental insurance/waiver products may be regulated by each states' insurance departments, and a special limited license may be required by the rental company in order to sell them. The specific coverage offered can differ substantially, depending on the state or country in which the car is rented.