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Coverage for Cars you Rent

Uncertainty about insurance often prevails when people rent cars. The big question: who pays in case of an accident?

The general rule of thumb is: your auto policy follows you. That means the coverage on your own car covers you if you drive someone else's car with their permission. That also applies to short-term rental of cars for personal use.

Because laws differ in some states, because some people don't have enough insurance, and because car rental agencies are concerned about preventing accident losses to themselves, uncertainty remains. And car insurers try to clear away the uncertainty.

In most states, of course, there is no coverage for physical damage to the rental car if policyholders don't carry collision or comprehensive coverages on their own cars. However, laws in New York, Minnesota, North Dakota, and Texas require rental car damages to be paid under the liability portion of the renter's personal auto insurance. Drivers who rent cars in New York are treated to an additional benefit: their liability is restricted to $100. New York rental agencies or their insurers are responsible for damages above that.

Intended use of the vehicle also is a factor in whether the policyholder's personal auto insurer will pay for damages. 

While a rented vehicle is being repaired, some rental agencies require payment from the user to compensate for loss of income because of the agency's inability to rent the car. North Dakota law limits - to 60 percent of the daily rental rate for a maximum of 15 days - the amount rental agencies can charge for loss of use.

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