Damage Waiver for Rental Vehicles: Is it Worth Purchasing?

Everyone knows that when you rent a car, you have the option of purchasing a "Damage Waiver" that relieves you of your responsibility for damages to the vehicle. There is a lot of controversy over whether or not to purchase the optional "insurance" as some people believe that it is nothing more than a money-making scam devised by the rental company. I assure you, it's not that simple. The rental company that I worked for paid for damages done to the rentals with that "pool" of funds, and believe me, with the cost of collision repairs today, we did not make money on the "insurance." I parenthesized insurance because that is not really an accurate name, as what you are actually buying is a waiver, not an actual insurance policy. Semantics aside, there are two much divided camps on whether or not to take this option-and it is always an option, regardless of what an agent may tell you--when you rent a vehicle and hopefully this can help you figure out which camp you belong in.

The most important time to get the optional coverage is when you do not have coverage of your own. If you do not have your own vehicle policy, or only carry liability, then you are 100% responsible for what happens to your rental-regardless of fault. Keep in mind that while the damage waiver is still optional, the rental agency reserves the right not to rent to you as you are essentially a risk not worth taking.

Another situation in which I recommend buying the waiver is for a short-term rental. Think about it. Your collision deductible is usually $250, $500 or even $1000. If your rental is a week or less, which most rentals are, I would get the waiver as it is not likely to cost that much. That way if something happens, you do not have to pay your deductible to the rental company, and they will not file a claim against your insurance policy for the damaged cars. Keep in mind; most people assume that "damage" only includes accident-related damage. This is not the case. The vehicle you rent must come back in the same condition as it was in when it left the lot. (Inspect it carefully with your agent-and make sure airport locations are notified of any damages in writing before you leave!!) Anything from a windshield star, a break-in, a dent from a neighboring car door, or even a hail storm could all lead to a claim being filed against your policy. To me, it's not worth it.

If you are renting a vehicle AND your car is being driven (i.e. you are lending your car to someone and need alternate transportation) your insurance policy probably will not cover both vehicles and therefore the rental is not covered.

The final reason that I would recommend the damage waiver is if you have an older car. Your insurance policy is based on your vehicle's worth and most rental cars are less than a year old. In some cases, the policy will not cover the full value of the rental only what your vehicle is worth, potentially leaving you holding the bill for damages if something were to happen.

On the other hand, I would not get the waiver if the rental period will be extensive and the amount would be greater than my deductible. These rental are very rare, but if your personal car is out of commission for a long time, and is not being driven, then I would not get the coverage.

There are lots of reasons why you might think that you shouldn't buy the damage waiver, and I would like to address the most common reasons that I have heard over the years:
1) "My insurance agent said not to buy it because I am covered." To which I would always ask: "Is your agent going to pay your deductible for you?" Ok, so not really, but think about this: Who gets the money when you have to pay a deductible and your insurance costs go up for having an accident/filing a claim? Your insurance agent does. While they may be correct in telling you that you are covered (always check!), they also have a reason for you not to buy the waiver. Often when you purchase the waiver, your insurance company is not even called.
2) My credit card covers me. This one scares me because there is soooooo much fine print to using a credit card for insurance on rentals. First and foremost, credit cards usually only cover a small car for a certain amount of days. Second, some require that you charge the full amount of the damages to your credit card while the credit company "investigates" the claim. Meanwhile you earn interest on the amount of the damages while they decide whether they are going to cover it or not. Third, some cards do not cover rentals if you have an insurance policy of your own. My only advice is really read the fine print in all of those credit card manuals and find out how it really works.
3) "I'm not going to have an accident." Really? You can see the future? You can keep all those idiots on the road away from you? Geez, I wish I could do that. Need I say more about why this is a ridiculous reason?

Basically, what it all boils down to is to make your OWN decision. Not what your co-worker always does, not what your insurance agent thinks you should do, not even what I think you should do. Read your insurance policy, credit card brochure, ask questions and find out what you really have in terms of coverage for the worst case scenario. As I always told people that purchased the waiver, "A meteor could fall out of the sky, crush that car out there, and all you would have to do is come back with the key and the steering wheel, sign the report and walk away." The peace of mind alone is worth it.