When traveling for a family vacation or business trip, renting a car is often part of the itinerary. However, renting a vehicle can leave you open to a number of financial risks. The good news is that by preparing properly and using smart strategies, you can ensure your pocketbook is protected before, during and after you return the keys. There are many factors you need to take into account when renting a car. We'll cover six of the most common variables, followed by best practices for reducing risk.

Six Common Rental Car Risks

  1. It may sound simple, but before you approach the counter or computer, be certain about the length of time the vehicle will be needed. Most rental insurance only provides coverage for a specific period, so if you're planning an extended road trip, you could be in for a rude awakening if coverage expires before you return the car.
  2. It's also true that where you rent a vehicle matters a great deal. Some credit cards may not allow coverage charges for car rentals in certain countries, leaving drivers exposed. Additionally, certain credit card issuers may exclude specific vehicle types from coverage, leaving the choice between a four-door sedan and an SUV more than just a matter of taste.
  3. It's bad enough for you to get into an accident when renting a vehicle, but it's much worse if the person driving isn't authorized. If someone who's not listed on your rental agreement is behind the wheel when an accident occurs, coverage may be waived and you'll have to pay for repairs out of your own pocket.
  4. Theft can ruin any trip, but it's especially painful when drivers are held liable. Many rental companies will not provide coverage for a stolen vehicle if you leave the keys in the car, which is something renters should keep in mind.
  5. Traffic violations result in higher insurance premiums, and also leave you open to expensive repair costs. If a rented vehicle incurs damage due to a traffic infraction, you'll find yourself on the hook for repairs.
  6. Read the fine print. Any time an agreement is made and signed, signees should take extra care to read the details. Rental agreements can contain a number of provisions that leave you vulnerable on the road.

Personal Auto Insurance, Credit Cards and the CDW

Before renting any type of vehicle, check your personal auto insurance policy. Most policies offer coverage for car rentals, but become familiar with rules and limits. It can save a lot of headaches later. 

Some policies may have specific provisions regarding the types of rental coverage they allow. And personal auto insurance policies will not cover "loss of rent" or "loss of use." This means that if you are held liable for an unusable vehicle, the rental company will not be reimbursed by your carrier for money lost while it's being repaired. A rental car company can pursue you for lost rent on an indisposed vehicle as if it were reserved 24/7/365. 

Additionally, rental companies can demand payment from you if an accident leads to a vehicle being worth less than it was before the incident. This is known as "diminution in value."

Besides personal insurance policies, many credit card issuers also offer collision damage coverage on car rentals paid for with their products. However, before relying on credit card coverage, you should make sure you understand exactly what you're getting, as well as any provisions that may leave you without coverage. You should also keep in mind that opting for a damage waiver from the car rental company mans you will not receive any coverage from your credit card company.

In most cases, it's probably wise for renters to invest in a collisions damage waiver, or CDW, from the car rental company. CDWs are not insurance. They are waivers (for a fee) which stipulate the car rental company will not try to collect a high deductible from you in the event your rental car is damaged. It's also possible for drivers to purchase theft/loss insurance along with CDWs, often at a reduced price when purchased together.

Our best advice when renting cars: consider the CDW a 'convenience fee.  Though your personal auto policy will pick up liability and property damage for the rental car, isn't spending the extra $15 per day for the CDW worth the convenience of being able to 'walk away' from an accident? Being able to hand the keys to the rental agent and have them handle the incident is better than having to pay out of pocket.

Follow the Rules of the Road

Of course, the best way to avoid being held liable for an accident in a rental car is to avoid collisions altogether. Following the law and using common sense goes a long way.

  • Drive at a safe and legal speed while staying focused on the road and surrounding drivers.
  • Avoid leaving your rental vehicle unattended for long periods of time. This can greatly reduce the chance of theft.
  • When parking, make sure there is plenty of space between your car and other vehicles, and avoid proximity to construction projects that might lead to damage.

 If you're planning to rent a car for business or pleasure in the near future, contact your HUB broker and make certain you have the right coverage for your needs.