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Getting into a rental car accident could be frustrating. Usually you are in a city that you do not know, a state with laws that you are not familiar with, and you are driving someone else’s car. This is a formula that can give you a big headache. So here is an overview of how rental car accident claims get handled and settled.
When you rent a vehicle, the rental company will ask you for your proof of insurance. Many of them will ask for your Declarations Page. They want to see what coverages you have. They will be looking for liability, collision, and comprehensive, in your policy. Liability is because it is required by law, but collision and comprehensive will protect the car you will be driving. 99% of the companies out there will extent coverage to the rental car and the rental company knows that.
Rental companies will want to know how much your deductible is. Your deductible is the portion of the loss that you are “self insuring”. For example, if the damage to the car is $5,000 and your deductible is $500, then the insurance company will only pay $4,500 ($5000 - $500 deductible); you will have to pay the $500 out of pocket. Many rental companies will require that your deductible be less than $500 or you will have to buy extra insurance at the time of renting the vehicle.
When you rent the car, then rental agent will ask you if you want extra insurance. Three things can happen: you decline all together, you buy extra insurance, or you buy a collision damage waiver. Depending on which option you select, the rental car accident will be handled differently by your insurance company.
First, if you decline all together, then you better have an active policy that will provide first party coverage for the rental car. Your insurance company will be responsible for paying the rental company for the rental car, but those payments will be subject to all the terms of your policy. What this means is that your deductible will apply and you will have to pay that to the rental company up front. It does not matter that you were not at fault for the accident; the rental car company is entitled to get the car fixed as soon as possible. Your insurance company will be responsible for going after the responsible party.
Second, you buy “extra” insurance. This is where things can get a little complicated. The insurance adjuster must look at actual policy that you bought (not given to you when you sign). The terms of that policy will determine how the accident will be handled. Some rental insurance coverages provide complete coverage any rental car accident as long as you pay the premium. They would cover the car that you hit (if you are at fault), and the rental car damage. You could still have a deductible. Your insurance company usually will step in as a secondary form of coverage in case the rental car insurance policy limits are low. However, you need to read both insurance polices together to see which one would pay first and which one would pay as the secondary.
Last, you buy collision damage waiver. Many people will tell you that this is coverage for your deductible. This is not true. When you rent a car, you agree that you will return the vehicle as it was given to you. You also agree that in case of a rental car accident, you will pay for the car. A collision damage waiver will waive that provision of your contract. This means that you are no longer responsible for the rental car. However, you still need to file a claim for your medical bills (in case of injury) and to defend you or pay for the car you hit (if you are at fault).