Why Purchasing Rental Car Insurance Isn’t Necessarily a Waste of Money

I recounted in my last post the many adventures we had driving 1,750 miles from Illinois to Arizona where we damaged not one, but two rental cars.  We saved $100 by not purchasing the rental car company’s auto insurance, but that decision cost us $500 in our deductible.  Not my brightest move ever.

If you think, like I did, that a rental car company’s insurance is a scam that should be avoided like the plague, here are some reasons why you might want to reconsider:

The Rental Car Company Has a Different Standard Than You

Rental Car InsuranceThe rental car company we used said any damage smaller than the size of a quarter, they would let slide.  Anything bigger than that, and it needed to be repaired.

Any time you drive a car, you risk bumps and scratches to the car’s exterior.  I have a large scratch on the back of my vehicle that I find annoying, but not worth the price of paying my $500 deductible.  I’m guessing your own vehicle has similar scratches and dents.  They’re minor, and you don’t want to spend the money to repair them.

The choice is yours because it’s your vehicle.  However, if it’s bigger than a quarter, the rental car company is going to make the repair, and you will pay if you don’t take out the rental car company’s insurance.

Your Insurance Premium May Go Up

Another reason people let minor dents and scratches on their own vehicles slide is because they don’t want to face a claim and risk having their insurance go up.

Some people even do this for more major repairs.  Several years ago, a man rear-ended me, and he chose to pay the $1,400 for the repair to me directly so he could avoid submitting the claim to his insurance and risk having his premium go up.

If you don’t purchase the rental car company’s auto insurance, you’ll have to choose to pay out of pocket or to risk having your premium go up.

How to Decide If You Should Purchase Insurance from the Rental Car Company

To decide whether or not purchasing insurance from the rental car company is worthwhile, ask yourself these questions:

1.  Have you made any claims on your insurance in the last three to five years?  If so, you will probably want to purchase the rental insurance; in the long run, that will be cheaper than facing a spike in your insurance.

2.  How far do you have to drive?  Of course, accidents can happen anywhere, but if you’re renting a car for the weekend and driving it around your hometown, you may be able to avoid rental insurance.  Our problem was that we were driving 3,500 miles round trip in an area we were unfamiliar with.  Things like dead deer and street sweepers on the highway pose risks that you can’t foresee before the trip

3.  How high is your deductible?  If your deductible is anywhere from $500 to $1,000, purchasing rental insurance may be smarter, especially if it is going to be less than $100.

What is your opinion?  Purchase car rental auto insurance or just rely on your own car insurance?

Original img credit: Insurance Disclaimer on Flickr

How Trying to Save $100 Cost Me $500

My husband was offered a job in Arizona, 1,750 miles from where we current live in Chicago, Illinois.  Because neither of us had been to Arizona before, we wanted to visit before we committed to living there.  Time was of the essence, and booking a last minute flight for the two of us was expensive, so we decided to drive.

We also decided to rent a car for the trip to save wear and tear on our car and pay less in gas (our family car is a minivan, so a small sedan would use much less gas).

Being frugal, I decided not to buy the rental car company’s insurance.  I had called my auto insurance company, and they assured me that my coverage would cover any damage to a rental car.

By not buying the rental company’s car insurance, I saved $100, or so I thought.

I was wrong.

Traveling Long Distances in Desolate Areas

100 cost me 500I was proud of my penny pinching ways until our first night on the road.  We were driving along a desolate stretch in Oklahoma; it was dark, and we were ready to stop for the night.  A semi was in front of us and swerved at the last minute.  We had no time to wonder why; a deer carcass was straight in our path.  Even though my husband swerved, he still hit it.  We felt the thump under our car and feared the worst.

When we got to the hotel, we didn’t see any damage to the bumper, so we thought we had lucked out.

That thought soon faded when we were driving through Texas the next day and heard something clicking against the tire.  A piece of the interior bumper was hanging down and hitting the tire.  We pushed it back in and thought all was well until we hit the brakes in Santa Fe and felt resistance on the tire.  Yep, the piece had fallen down again.

Long story short, in Arizona, we traded out the vehicle for a different one and had to pay a $500 deposit for the repair.

Street Sweeper Causes Havoc

On the way back home, in our new rental vehicle, we ran into a street sweeper on the highway in New Mexico.  (Seriously?  I have never seen a street sweeper sweeping the highway!)

As we passed the street sweeper, what seemed like a million pebbles pelted our windshield.  I think my husband and I cursed in unison when we heard a particularly nasty hit on the windshield and saw a chip in the windshield, right in the middle of the driver’s side.

Car rental number two, and another injury to the car.

Sigh.  Suddenly my decision to try to save $100 by not getting the rental company’s car insurance didn’t seem like such a good idea.

Luckily, when we turned in the second car, we weren’t charged for the damage to the windshield.  (Any dent or scratch smaller than the size of a quarter, the rental car company let’s slide.)

Still, my desire to save $100, ended up costing me $500!

Stay tuned for part two, where I’ll explain in more detail why rental car companies’ insurance isn’t the waste of money we all think.


In a Car Accident? Should You Pay Out of Pocket for Repairs?

Our Chicago winter this year has been a lot less like a Midwest winter–the snow storms have been few and far between.  A few weeks ago we finally got hammered by a storm that dumped 10 inches over the city.  At the height of the snow storm I had to pick up my son from school.  As I waited at a stop sign, the driver behind me bumped into my bumper.

Luckily, the damage wasn’t bad.  When I took it to a repair shop for an estimate, they thought it would cost between $580 and $1,200 to fix depending on if there was any damage inside the bumper when they take it off to repair it.

Surprisingly, the woman who hit me decided she wanted to pay out of pocket rather than go through insurance.  When I told her that the repair would take 2 to 3 days and we’d need a rental car during that time, she agreed to cover that cost, too.

This is the second time I’ve been rear-ended in 5 years, and both times the repairs were less than $2,000.  Both times the drivers opted to pay out of pocket.

If you’re in a minor fender bender, should you pay out of pocket rather than going through insurance?

Reasons You May Want to Pay Out Of Pocket

Pay out of Pocket for Repairs1.  If you have a high deductible.  If you have a deductible of $1,000, for example, paying out of pocket if the repair is just a few hundred dollars over that amount may make sense.  You’ll save yourself from an increasing premium.

2.  If your insurance premium will increase substantially.  Each insurance company is different, but rest assured that if you cause an accident and file a claim, your insurance will increase.  Some insurers increase your premium by 10% and others by 20%.  You may be able to call your insurer and ask how much the premium will go up before you decide to pay a claim or not.

3.  If this is your second accident.  While you’ll pay an increased premium for one accident, if you file two claims within a few years of one another, the increase is substantial.  For instance, State Farm generally charges a 10% increase in premium for the first claim, but that amount increases to 45% for the second claim.  While it may hurt your budget to come up with a thousand or two to pay out of pocket for the repairs, that may be the better option if you’re facing a substantial increase that could last several years.

4.  If your insurance doesn’t have an accident forgiveness clause.  Some insurers offer an accident forgiveness clause, meaning, if you’ve been with the company for a certain number of years (usually 5 to 9) with no accidents, the insurance company won’t increase your premium on the first accident you file.  Again, though, you may want to save this benefit for a more substantial accident that you can’t afford to pay out of pocket rather than when the repair is relatively minor.

If you cause an accident, don’t automatically file a claim.  There are benefits to paying out of pocket.  You just need to understand your insurance policy as well as know exactly how much the repairs will cost before making a decision.

If you’ve caused an accident, did you pay out of pocket rather than filing a claim?

Original img credit: Oops, by fortes on Flickr