Giving Cash Away

If you're like most of us, you don't take $20 bills and throw them off a tall bridge into the river. Yet when many Americans step up to the car rental counter, they do the equivalent of just that. Confronted with the arcane concept of rental car "waivers," they act like the proverbial moose in the headlamps, first freezing and then bolting the wrong way. While many of us possess the financial sophistication to plan for our retirement, pick the occasional hot stock, and actually get our bills paid on time, when it comes to rental waivers, we seem to have all the savvy of a blubbering five-month-old. It doesn't have to be that way.

First let's help you get a grip on what the waivers actually are. First, they are a big profit opportunity for rental car companies, but beyond that they can offer you worthwhile protection from financial loss... if you need them. Rental car companies sell waivers that cover liability (damage you cause to other people or property), collision (damage you cause to the vehicle you rented), and comprehensive claims (stolen vehicles, weather-related damage like that caused by hail and flooding and collisions with animals like the aforementioned moose in the headlamps).

How does this protect you? When you buy waivers, the rental car company gives up its right to collect damages from you. That's a good thing, kind of like insurance against a big claim if your rental minivan falls off that big cliff in Hawaii while you and your kids are admiring the view. But, since buying waivers can add substantially to the cost of a rental (waivers can cost between $7 and $25 per day, depending upon the company, vehicle, and type purchased), it's important to know whether you need them.

And the fact is that it seems most people don't know if they need them. In a recent survey conducted by the Progressive group of insurance companies, of those drivers who have rented a vehicle in the past three years, 18 percent said they always buy the waivers at the rental car counter, while 12 percent said they sometimes buy them and 68 percent said they never buy the waivers offered at the rental car counter.

When asked why they buy waivers at the rental car counter, 54 percent of drivers said they do so because they want extra coverage beyond their own policy limits (a good reason if true), 32 percent don't believe or know if their current auto insurance policy covers them (not such a good reason), and nine percent said they feel pressured into buying the waivers by the rental car company representative (not a good reason either.)

So, should you buy waivers at the rental car counter this summer? We'd like to give you a one-size-fits-all answer but, unfortunately, we can't. But here's good advice from an expert:

"It's important that consumers understand what they're already paying for and how it applies to a rental car," said Tom Hollyer, director of product development, Progressive. "That way, they can make a more informed decision about what they may or may not need to buy at the rental counter. If you have 'full coverage' on your personal automobile (comprehensive, collision, and liability coverages) you should check with your agent or your company to see if that coverage extends to a rental vehicle. Chances are it does, and if you're involved in a crash with a rental car, in most cases you would be liable only for your deductible on comprehensive or collision coverages, just as you would be in your personal vehicle."

The key advice here is check with your insurance agent or insurance company. While it probably won't be the most exciting phone call you ever make, it could end up saving you $350 over the course of just one two-week vacation. Wouldn't you rather spend that $350 on a couple rounds of golf, a big steak dinner, or theme park admissions for the kids rather than on waivers of liability?

Additionally, you should check with your credit card company(ies) to learn their policies, because some companies will provide you with coverage at no charge if you use their card to rent the vehicle. You might also want to go to the extreme of taking a copy of your insurance policy along on vacation with you. It's not that the policy needs a break from its dreary existence in the file cabinet, but it might be useful to consult with the policy at the rental car counter if you're unsure.

In this case, as in many, knowledge is power. If you take that five minutes to talk with your insurance and credit card companies it could save you serious cash, and that's a reason to smile whenever you go on vacation.

Driving Today Managing Editor Jack R. Nerad is the veteran of many family vacations that have involved rental cars.