Insurance can be confusing. One thing that causes a lot of confusion, specifically in the rental car industry, is knowing the difference between rental car insurance and traditional auto insurance. These two types of coverage serve similar purposes, but they operate very differently. For renters, businesses, and claims professionals alike, knowing the difference is essential.
What Is Traditional Auto Insurance?
Traditional auto insurance is a long-term policy that protects a personal or commercial vehicle owned by the policyholder. Most policies also include:
- Liability: Covers injury or damage you cause to others (drivers in the U.S. are legally required to carry liability coverage at the very least)
- Collision: Covers damage to your own vehicle in an accident
- Comprehensive: Covers damage from non-collision events (such as theft or weather-related damage)
- Uninsured/Underinsured Motorist Coverage: Covers costs if you're hit by a driver without adequate insurance
This type of insurance follows the policyholder and their own vehicle, but not a temporary or rented one (although some coverage may extend to rental cars depending on the provider and policy). However, relying solely on traditional coverage can sometimes lead to unexpected expenses if the policy doesn’t include rental extensions.
For drivers, understanding their existing auto insurance is crucial before renting a car. A quick call to their insurance provider can clarify what is (and isn’t) covered. For businesses, knowing what type of policy a renter has can save hours of back-and-forth and reduce costly delays in subrogation. Unresolved or unclear insurance coverage can potentially lead to long timelines, unpaid damage, and disputes that sour customer relationships.
What Is Rental Car Insurance?
Rental car insurance is a type of short-term coverage offered when a customer rents a vehicle. It’s typically available at the rental counter, online during the booking process, or through third-party providers like travel insurance companies and credit card issuers. Rental car insurance can include several different types of coverage:
- Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW): Covers damage to the rental vehicle or theft, usually without a deductible
- Liability Coverage: Covers injury or property damage you cause to others while driving the rental
- Personal Accident Insurance: Covers medical expenses for the driver and passengers
- Personal Effects Coverage: Covers theft of personal items from the rental vehicle
While this may seem like a lot, especially if the driver already has their own insurance, this can help fill important gaps. Many personal auto policies have high deductibles or limited rental coverage. Plus, if a driver is traveling internationally, their standard insurance likely won’t apply.
Do You Need Rental Car Insurance?
For drivers, the decision to purchase rental car insurance should depend on several factors. Do they have full coverage (liability, collision, and comprehensive) on their personal vehicle? Does their personal policy extend to rental cars? Are they traveling outside their coverage area? Are they prepared to pay a deductible if damage occurs?
For rental car businesses, rental insurance makes claims and subrogation more efficient. When the right coverage is in place, damages are often resolved without lengthy back-and-forth between insurers.
Viking Client Services Can Help
At Viking Client Services, we help create a better claims experience for rental companies and the people they serve. Whether it’s explaining the nuances of rental car insurance or stepping in to support a subrogation claim, we ensure the right insurance is applied to the right damage and that recoveries happen smoothly. As we continue to grow with our clients and their customers, we work to build trust not just by solving problems, but by showing up with answers, support, and a deep understanding of the industry we serve.
