Renting a car can be a bit daunting, with all of the variety of products and terms being used by the rental agent. It is often quite confusing, since the products being offered are merely designed to pass financial responsibility for the car to the rental company in the event of damage or theft of the rental car, rather than the renter using their personal auto insurance.
They all offer the same basic coverage options
The three most common types of coverage that can be purchased include:
Collision Damage Waiver (CDW)
This is also referred to as a Loss Damage Waiver (LDW). It passes on financial responsibility for the car to the rental company, meaning they'll pay for damages to the rented vehicle in the event of a collision.
Personal Accident Insurance (PAI)
The rental car provider will pay a death benefit or some of the renter's medical expenses if they are involved in an accident.
Personal Effects Coverage (PEC)
The provider will pay for personal possessions, like luggage, in case they are damaged while driving.
The CDW/LDW normally covers all of the potential costs associated with a rental car, including loss of revenue to the rental company if the automobile is damaged or totaled. This process relieves a renter of any further financial responsibility to the renter. Note that there are significant terms and qualifiers attached to these products, many of which will void them if a renter violates any of them during the course of the rental contract.
By driving under the influence of alcohol or drugs, or allowing a person not listed on the rental contract to drive the car, a renter has almost certainly violated the terms of the contract.
Personal auto insurance may already provide sufficient coverage
It's possible a motorist may already have rental coverage in their auto insurance policy. For example, in Minnesota, every auto insurance policy has to include a minimum of $35,000 in coverage for damage to a rental car, so check the policy because in many situations any existing bodily injury and property damage liability will be extended to cover any rented vehicle.
Call an agent or insurance company representative to see if the current insurance policy will offer sufficient coverage for renting a vehicle.
Finally, anyone who doesn't have an insurance company because they don't usually drive and don't own a car (not uncommon in areas with abundant public transportation) would probably want and need to purchase a non-owner insurance policy.
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