Rental car insurance may not cover the entire vehicle. Here’s what you need to know about car rental insurance.
Renting a car can be a pretty good alternative that sits between using public transportation and bearing the financial burden of owning a car. You get full use of the vehicle when you need it, without having to worry about maintenance, maintenance or even washing your car.
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You do not need to have car insurance before renting a vehicle. Instead, your rental company will ask you to sign up for an auto insurance package that takes effect for the duration of your rental.
This is what you should pay attention to when signing up.
1. Beware of excess
Yes, while driving a rental car, you should probably watch out for excessive behavior like pounding cans of RedBull and entering a staring contest with your friends while blasting your favorite EDM songs. But what we actually mean is the deductible on your car rental insurance.
Auto insurance usually has a deductible, which is an amount that you must cover before any claims are made.
To illustrate, suppose your rental insurance policy has a deductible of $1,000. So, if you get swept aside and lose a side mirror that costs $150 to replace, there’s no point in making the insurance claim.
This is because you have to pay up to $1,000 in repair costs out of pocket (also known as the deductible), before your insurance pays the rest of the bill. In this case, you’ll pay just $150, which is well within the deductible.
However, if you fall behind and the repair bill costs you $3,000, claim your insurance. That way, you only pay $1,000, while your insurer covers the remaining $2,000.
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2. Beware of ‘double’ or ‘multiple’ deductibles
No, we don’t mean double that Red Bull and decide it’s a good time to test the speed limit of the car you’ve rented, but rather how often your deductible can be applied.
You see, auto insurance can be roughly split into two parts: coverage for you, the driver, and coverage for third parties, such as your friends having an impromptu wrestling match in the back seat.
Some auto insurance policies apply a deductible to both parts (sometimes referred to as a “separate deductible”). How does this work? Suppose you have a rather serious accident with a damaged car door and a broken wrist for your friend who is driving with you.
As the driver of the rental car, you are now responsible for compensating for two sources of damage:
1. Car repairs
2. Hospitalization and medical bills for your friend
Now if your insurance policy is in a ‘double deductible’ format, you’ll have to pay the deductible twice – once when you pay the auto repair bill and once when you pay your friend’s medical bills (assuming he has a claim against you submit).
Depending on the deductible in your policy, this can become very expensive for you.
You can manage this in two ways:
1. Opt for a lower deductible, which results in a higher rental price
2. Choosing a policy with one deductible that applies to the total of all damage you encounter.
3. Be sure to name all co-drivers
If your buddy or family member will also be driving the rental car at some point, be sure to register it when you purchase your car insurance policy.
While this will drive up your insurance premiums – especially if your co-driver(s) are young men with less than two years of experience behind the wheel – it’s much better to suck it up and pay.
That’s because if an accident occurs while an uninsured driver is behind the wheel, your auto insurance policy will automatically become void, leaving you without any coverage. Depending on the severity of the incident, this could be financially catastrophic or even disastrous.
ALSO READ: 5 Best Auto Insurance Plans in Singapore (2021)
4. Cross-border travel may not be allowed
If you plan to drive across the border to another state or country, you should notify your insurer when applying for rental insurance.
This is because by default auto insurance only applies when driving within a local area, and can be canceled once you cross the border.
Plan your route carefully and inform your insurer so that they can arrange the correct insurance coverage for you and the vehicle.
5. You may not qualify for rental car insurance even if you are a qualified driver
Some car rental companies have strict criteria regarding who can rent their cars. Some of these include age limits (younger drivers may be disqualified), number of years of driving experience and type of driver’s license.
In fact, it’s common for rental car companies to reject P-plate drivers.
If you plan to drive while on vacation abroad, it helps to have an International Driving Permit (IDP).
This diving license includes driving conditions in several languages, which facilitates the application process for a rental agreement in non-English speaking countries.
ALSO READ: So you were in a car accident. Here’s How It Affects Your Insurance
6. Don’t neglect the theft/loss waiver!
Traffic accidents are not the only thing to worry about when driving a rental car. Your vehicle could be stolen or lost!
As a registered driver of the vehicle, you are ultimately responsible for it as long as it is in your possession.
This means that if that snazzy BMW you rented for your cousin’s wedding was somehow stolen while the wedding entourage was busy negotiating access to the bride’s house, you’re liable for the financial loss.
To avoid this annoying situation, you should check whether your rental insurance includes an exemption for loss or theft of the vehicle. You need this exemption to save the financial liability of the loss of the vehicle.
7. Don’t forget the windshield and tires
It sounds strange, but your rental car insurance may not cover the entire vehicle. In particular, the windshield and tires may not be included in your policy.
This means that if your car tires are cut or the windshield is smashed in an attempted break-in, you may be liable for the full damage if your policy does not cover these two items.
This is probably because flat tires or cracked windshields are quite common, so many insurers omit them to lower their overall premiums.
But if you’re not willing to take the risk of paying for damage to either component, make sure your policy covers it.
ALSO READ: Everything you need to know about No-Claims Discount for car insurance
This article was first published in SingSaver.com.sg.