Rental car insurance

Rental car insurance protects a person from financial loss after an accident involving a rental vehicle. The insurance is not required by law in all states, but most states require a person who rents a car to have liability coverage. Liability insurance covers the party at fault for any injuries to drivers, passengers, and others involved in an accident, as well as damages made to property. It pays medical bills, expenses associated with pain and suffering, and lost wages. Collision coverage includes damage to a vehicle as the result of a car accident or collision with another object. Most rental car agencies provide rental car insurance for an additional cost. The coverage can also be obtained through private companies. In addition, some people may already have existing rental car insurance through their vehicle insurance policies, health care plans, or credit card agreements.

Background

Car insurance protects the driver of a vehicle, passengers, and other people (and property) involved in an accident. In most states, drivers must prove financial responsibility, meaning they are able to pay for damages incurred in case of an accident. People can prove this by purchasing vehicle insurance.

With the advent of automobiles during the nineteenth and twentieth centuries in the United States came the need for car insurance. More vehicles and drivers on the road meant an increase in accidents. Arguments ensued over who was responsible for these accidents. In addition, many people could not pay the costs associated with the wrecks. Thus, the first car insurance policy was born, offered by Travelers Insurance Company of Ohio in 1897. The policy covered a person in the event they injured someone or damaged property in a vehicle accident.

While car insurance was available at the beginning of the twentieth century, no laws required drivers to have it. Issues developed when accidents occurred; even if a person was found at fault, nothing in place forced the person to pay for the costs of the accident. This prompted a few states to enact financial responsibility laws that required drivers to prove they could pay for any damage (injuries and/or property damage) they caused in an accident. In the years that followed, more states began to require drivers to purchase some form of vehicle insurance.

The demand for vehicles increased in the early twentieth century, but many people could not afford vehicles of their own. This led to several rental car companies emerging during the 1920s. To rent a car, agreements were made between the person or company renting out the vehicle and the renter. These informal contracts usually required a person to pay a set price, drive an agreed-upon number of miles, and have the vehicle back by a certain time. As rental cars became more popular, companies had to figure out a way to ensure their vehicles were returned—and without damage. They also had to protect themselves from being liable for any damages incurred to others or property by rental drivers. Thus, rental car insurance was developed.

Overview

Rental car insurance protects the company renting out a vehicle as well as the person renting the vehicle. Drivers in nearly every state are required by law to carry minimum insurance requirements. While the law does not require drivers to have rental car insurance, all drivers must have liability coverage to rent a vehicle. Some people may already be protected through their own personal vehicle insurance policies, health care plans, or credit card agreements. However, what exactly the plans encompass differs according to the individual policies. Rental car companies offer rental car insurance to all of their customers—for an additional fee; whether it is needed is left to the discretion of the individual renting the car.

People who do not know this information ahead of time may find themselves buying unnecessary—and usually expensive—rental car insurance. If they forgo it, they risk being held responsible if they are involved in an accident and do not have proper insurance. Prior to renting a vehicle, individuals should contact their car insurance companies, credit card companies, and health insurance providers so they know if they have existing rental car insurance and what will be covered in case of an accident. Renters can always add more coverage if needed. In addition, several companies offer rental insurance policies similar to the ones offered by rental car companies but for a fraction of the price.

Rental car companies typically offer several types of coverage. These can include a collision damage waiver, which protects drivers from being held responsible if their rental car is stolen or damaged. Renters can add personal effects coverage, which protects personal items if they are stolen from the rental car. In the event of an accident, supplemental liability protection covers passengers or other people/property involved. Personal accident insurance pays costs for injuries/deaths of the drivers and passengers of the rental car.

Some drivers may have rental reimbursement coverage rolled into their car insurance plans. This optional insurance usually costs extra. It reimburses the cost of a rental car if a person's vehicle is damaged by an accident. It does not include damages to rental cars. This is where liability and collision insurance on a person's existing vehicle insurance can step in to help. (This only applies to policies that include rental cars; drivers should first check their plans.) Liability covers rental car drivers who are in accidents. It not only pays to repair damages to the car and/or property but also pays for injuries to the other party. Collision covers damages to the other party's vehicle.

If a person uses a credit card to pay for the rental car, the credit card agreement may include rental car coverage. Some plans may only offer collision, which encompasses damages to the car or property; it does not pay for any medical costs associated with the accident. Some credit cards may offer liability for an extra fee, and some may only provide secondary coverage that will kick in after another policy has been exhausted. Some health insurance plans may cover injuries a driver sustains in a car accident. These plans typically do not pay the medical bills for passengers or other parties involved in the accident.

Bibliography

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