As agents, we are often asked several difficult questions about auto insurance coverage and how it will respond to various situations. One of the most frequent questions we receive is about purchasing the collision damage waiver when renting a car.

You know the routine. You just got off the plane for your vacation. You are ready to head to the beach, but first, you must go through the dreaded conversation at the rental car desk.

“Would you like to upgrade to a bigger car?”

“Don’t need it.”

“Would you like to rent a GPS?”

“Brought my own, thanks.”

Now, the biggie:” “Would you like to pay for the collision damage waiver?”

Before you quick”y reject this one as well, we want to give you five reasons below why you should strongly consider purchasing the collision damage waiver the next time you rent a car.

1. Lo s Valuation a d Settlement. Do you know most rental agreements allow the rental car company to determine the vehicle’s value solely at its discretion if you are involved in a claim?

So if you are in an accident that totals a vehicle that is a few years old, the rental car company can still charge for a brand new vehicle. A standard auto insurance policy only pays “Actual Cash Value” for the car, which means you will be stuck with the difference in value.

2. In-ir ct Losses. If it is an accident, you will most likely also be responsible for the loss of rental income incurred by the company while the damaged vehicle cannot be used. While many auto policies will provide some coverage for this, there have been many cases where individuals are still charged thousands of dollars above what their insurance company would pay for.

3. Administrative  Fees. If you manage a vehicle, the rental car company may add additional charges for expenses such as towing, storage, and claims adjustment, calling them “administrative fees.” Your insurance policy will not cover these expenses, either.

4. Diminution of Value.  This is another fee the rental car company can add if the vehicle’s damage is over a certain amount. For example, suppose a rented car sustains more than $1,000 in damage. In that case, many companies will charge an additional percentage fee (typically 25%) because they figure the sustained damage has now decreased the value of the car and their ability to sell it. Your auto policy isn’t picking up.

5. Loss Pa meant. If you happen to damage a vehicle, it is common for the rental car company to immediately charge your credit card for the damage. This can create a huge mess as it could potentially max out your credit card, which creates some real headaches for insurance companies.

One of the provisions within your policy is that the insurance company needs to be able to inspect the vehicle so it can accurately calculate the damage amount. The rental car company may not wait for an adjuster, and it is common for them to charge your credit card and begin repairs immediately.

The problem is that the provision within your insurance policy mentioned above may give your auto insurance company the right to deny the claim as they were not allowed to inspect the vehicle properly.

Between the fees associated with damaging a vehicle, the valuation process, and the payment mess, you can see how you could quickly be out thousands of dollars.   By not signing the waiver, you may be setting yourself up for some substantial personal expenses.

Recommendation:  We know you don’t want to pay more for the waiver, but believe us, if you damage a rented vehicle, your life will be much easier.

Disclaimer: The above information is to be used as guidance only and is not to be considered definite in any particular case. Every policy is different, and you need to read through your policy and consult with your agent to determine how your coverage will respond. The information provided is based on the ISO standard Personal Auto Policy in force in most states. Policy provisions and laws vary from state to state and can change at any time. Due to the brevity of this article, we cannot analyze every possible loss exposure and exception to the general guidelines above.