All You Need to Know About Car Rental Insurances

1)   The Graves Amendment: What it Means For All Renters

A little-known fact is that every rental car in the United States must have the minimum liability cover to a level each state prescribes. This is morally correct, since a motor vehicle owner has a duty to compensate a third party for any damage or personal injury their vehicle causes. Hence, this equally applies to owners of rental car fleets. However, damage for which a hirer of a rental vehicle is responsible is not automatically covered, rather it’s a matter between the renter and the rental car vendor. These are the main points we address in this article.

2) Limitations to the Effectiveness of State-Prescribed Liability Cover

U.S. Congress approved the ‘Graves Amendment’ to the Federal Highway Bill in 2005. Essentially, this disallows vicarious liability claims against car rental companies for third party injuries their customers cause, unless there is proof the company's negligence or actions contributed to those injuries.

We believe most renters do not know the rental car has the state minimum liability insurance, which seems to make for easy pickings when the rental counter staff offer liability insurance to their customers. Let’s be clear, it’s not an up-sell being offered given the counter staff fail to inform renters of the state minimum liability coverage already applied to the rental vehicle.  We don’t rule out that the counter people genuinely do not know about the state minimum, but we suspect that would be negligent on behalf of the rental company not including it in basic training.

3) All You Need to Know About Rental Company Waivers

Renting a vehicle is a convenient solution for a family on holiday, or a businessperson in an unfamiliar town. However many are unprepared for lengthy agreements and disclaimers they must sign. Counter clerks may pepper them with these unfamiliar acronyms SLP, CDW, CLW, PAI, PEC etc. They often take the easy way out and purchase the damage waivers, not realizing they may cost more than the basic hire.

The New York Attorney General put a fact sheet together that makes for interesting reading. What follows may be all you need to know in condensed form. Here’s the link if you wish to explore the topic further, but stay with us for now. Please note while the trends are correct details may vary between individual states.

  • Purchasing additional insurance at the counter may duplicate what you already have. Rental car waivers also cost considerably more than the primary standalone rental car insurance.
  • Purchasing additional insurance at the counter is optional. There is a prohibition against refusing to rent a car unless the customer purchases their cover. Of course, there are several other, vicarious reasons they could use. However, a rental company has a right to see proof of alternate cover.

In many instances, customers already have sufficient existing coverage in their auto insurance, or in the small print of some credit cards to replace rental company waivers. When used for this purpose they become secondary insurance garnished with many provisions so there is more to it than simply using it. Therefore, an increasing number of drivers appreciate the straightforward, and affordable cover of third party rental car damage insurance.

  • A spouse of a nominated car renter may drive the vehicle without permission - although it may be sensible to add them in the absence of proof of the relationship in the form of a marriage certificate.
  • A credit card is not mandatory, although rental companies may use a different screening process and require a cash deposit. The screening procedure may take several days so complete the exercise in advance of the hire.
  • Rental companies may not discriminate based on race, color, ethnic origin, religion, disability, gender or preferences. They may however surcharge drivers below a certain age. The amounts vary so shop around.

4) What to Consider Before You Accept a Waiver

Some auto renters decide to accept the waivers despite the limitations and the costs. They may not have investigated cheaper options beforehand, or be cajoled into accepting the waiver.

There has been much criticism of rental agreement conditions over many years. The National Council of Insurance Legislators is pressing for states to take a uniform approach. We summarize the national council’s thinking here. Here’s the link if you would like to delve further. You may find this information useful background in a discussion at an auto rental counter. Here are the main points they recommend:

Disclosure Requirements

A rental vehicle company shall not offer a damage waiver to a consumer, as an optional provision in a rental agreement for a motor vehicle, unless the rental agreement contains all of the following statements:

  • The purchase of a damage waiver is optional
  • The purchase of a damage waiver is not required to rent a motor vehicle 
  • The renter may wish to contact his or her insurance representative or credit card company to obtain some or all of the following information: 
  1. Their coverage or protection, if any, for damage to or theft of a rented motor vehicle
  2. The amount of their insurance deductible or out of pocket risk for filing a claim for damage to, or theft of, a rented motor vehicle

5) Renters Already Have These Rights - They Just Have to Know How to Secure Them

The National Council of Insurance Legislators is pressing for rental companies to have written materials or brochures readily available, that contain all of the disclosures above.

We provide this information as a service, since we know that it will take years, if ever for them to achieve their wish. For if they do, auto rental companies could forfeit a sizable share of their income to primary rental car damage insurance such as alternative insurance companies offer.