Rental Car Liability — You May Be Surprised What You Are On The Hook For
In one of Jeff Foxworthy's stand-up routines, he says that whenever a car-rental agent asks him if he wants the extra insurance, "I'm like, 'Yes, I would. 'Cause you've got a Ford Fiesta that's about to see more air time than a skateboard at the X Games.'"
While we don't encourage you to drive like Foxworthy, making sure your rental car is insured is always a good idea. In fact, it's a necessity. Some of you are probably thinking, "I don't need the insurance. I'll just be careful and not get into an accident." Even if you could guarantee you would never cause an accident, though, what about hail damage? What if someone vandalizes the rental car or steals it? What if someone bangs into it with a full shopping cart? Can you guarantee those things won't happen?
"But none of that would be my fault," you might be thinking. Do you think the rental company cares who's at fault? If so, read your rental agreement a little more closely. You're on the hook for any damage to the vehicle during the time of your rental regardless of fault, even "acts of God." (Remember, God doesn't carry State Farm.)
But it's not just the damage you might be responsible for. If the rental vehicle needs to be repaired, the rental company may charge you a "loss of use" fee for every day it's in the shop. And hopefully the car is returned to the right location once it's fixed, because there's also a "returned to the wrong location" fee. So whether it's your own insurance, the rental company's insurance, or your credit card's policy, make sure the car is covered.
Hail and other weather damage
It might seem crazy that a rental car company would hold you responsible for something like hail damage, which is almost completely out of your control. Yet that is exactly what happened to 23-year-old Faith Marie Spillers this year. Her husband had just finished basic training in Oklahoma, so she decided to fly there to attend his graduation, then rent a Toyota Corolla from Enterprise. While she was there, a hailstorm erupted and significantly damaged the car.
The day after she returned the Corolla, Enterprise charged her a $1,000 deductible. Not long after that, she says, it sent her a bill for $10,000. Why was she charged for something that was clearly not her fault? Enterprise told Motor1, "Sometimes customers mistakenly believe if they didn't personally cause or witness any damage that they are not responsible. This is one of the most common misconceptions about rental vehicle damage. In fact, customers are financially responsible for damage that occurs during a rental transaction, regardless of fault or negligence, just as if they owned the rental vehicle themselves. This is stated in our rental contract."
What could Spillers have done? For one thing, she could have opted for the extra coverage from Enterprise when she rented the car. Understandably, she felt the company was already nickel-and-diming her with the substantial "young renter's" fee (car rental companies do like to add on extra fees), and that she couldn't afford to spend another $40 to $50 per day. But it would have cost her far less in the long run. Incidents like this can happen to anyone, which is why it's important to make sure your rental car is covered.
If another driver causes the accident
What if you're hit by a drunk driver? Surely the rental company won't hold you responsible for that, will it? If you've read this far and are still asking questions like that, you aren't paying attention. Yes, you can very well be on the hook if your rental car is hit by another driver.
In December of 2022, Joe Vandetta and his family made the same holy pilgrimage a lot of American families do during the winter — they went to Florida. At one point, the family made their way to Key West in a big SUV rented from Budget. After spending the day there, they started back to their hotel, 45 miles away in Marathon Key. We've talked about weather and other hazards that could damage a rental car. But the Vandettas weren't counting on one additional danger found in the USA's southernmost state: Florida Man.
On the family's way back to their hotel, another driver plowed into their SUV. No one was seriously hurt, but the other driver left the scene. Shortly after the cops showed up, however, a man obviously under the influence came staggering up. It was the driver who had crashed into their car. He admitted causing the crash.
The family found their way back to the hotel, and eventually back home to Ohio, only to receive an unpleasant surprise about a month later. It was a bill for $22,158, the value of the car, give or take some fees and the proceeds of the salvage sale. Vandetta was able to convince Budget to pursue the drunk driver's insurance for that amount. But soon, he would receive another invoice, this time for "loss of use" and "administrative fees."
Loss of use, returned to wrong location
Damage to your rental car isn't the only thing you could be held responsible for after returning it. The Vandettas learned this the hard way after returning from their Florida vacation. Yes, they had gotten Budget to change its mind about pursuing them for the value of the demolished rental SUV, but shortly thereafter they got another letter from Budget, which had charged their credit card an additional $2,370. Budget said it was for "loss of use" and "administrative fees." A closer look at the bill revealed that they had actually been charged a daily rental charge for a month after the collision and a "one-way drop-off" fee of $300 (the car had been returned to Miami instead of Fort Lauderdale, where they had picked it up).
The Vandettas tried talking to Budget again, but this time the rental company stayed firm. It would not refund the charge. So Joe Vandetta contacted a consumer advocacy group, Consumer Rescue, which contacted Budget's parent company on his behalf. Shortly thereafter, Budget refunded the full amount of $2,370.
Things worked out for the Vandettas, eventually. But the fact is, car rental companies include in their contracts stipulations that put you on the hook for things like "loss of use." There also can be hefty charges if the car gets returned to the wrong location. The good news is that "loss of use" is covered by the insurance you can buy from the rental agency. It may also be covered by your own insurance or your credit card. But you'll want to check to make sure.
Do you have to take the rental company's insurance?
There's no doubt that insurance coverage is a must. But is the rental company's insurance your only option? Actually, you have multiple options.
For starters, the insurance policy you keep on your own vehicle may cover rental cars. But you'll want to look at the fine print. Does it cover any damage to your rental car or just damage you cause (liability)? Does it cover things like "loss of use"? Is there a deductible? If so, how much is it? Call your insurance agent if you're not sure on any of those points. You can always add riders to your insurance to cover these things. If you don't have auto insurance because you don't own a car, there are third-party insurance companies that specifically cover rental cars.
Another option is your credit card. Some credit cards cover damage to rental cars, including "loss of use." Check your credit card agreement in detail before relying on it for coverage.
Even the rental company's insurance presents multiple choices. The "collision damage waiver/loss damage waiver" covers damage to the rental vehicle (though there may be a deductible). Supplemental liability insurance covers damage you cause to others' property or persons. Personal accident insurance also covers your and your passengers' property damage and medical bills, but may overlap with other policies, so you may not need it. Personal effects coverage covers the cost of possessions stolen from the rental car, which may also be covered under your homeowner's or renter's policy.
You don't have to choose all of those and may decide you don't need a couple of them. But at a minimum, one way or another you should be covered for collision/loss damage and liability.
What to do before you rent a car and after you get in an accident
If you take anything way from the article, it should be this — make sure your rental is covered for any damage, regardless of fault. That means you need comprehensive coverage and liability. It's a good idea to make sure fees like "loss of use" are covered as well. To do that, you must check the fine print on whatever source of coverage you choose, whether it's the rental company's insurance, your personal insurance, third-party insurance, or your credit card.
Also, make sure you're not blamed for pre-existing damage. Thoroughly inspect the car for damage before you take it off the rental lot. Photograph any dents or scratches and point them out to the rental agent so they can be documented. You'll also want to inspect the car when you return it. And, of course, fill the tank of your rental, since charging customers a huge price per gallon is one of the common car rental scams.
If you get into an accident, get caught in a hailstorm, or anything else happens that damages the rental car, take photos, get the police report, and get everyone's insurance information. If the car is broken down and needs to be towed, make sure it gets towed to the right location, so you're not charged the "one-way drop-off" fee. Don't make assumptions about where the tow driver is going to take it.
Making sure you have the right coverage for your rental car might seem like a pain, especially if it involves paying a little more. But compare that to the cost and aggravation of paying for damage out of your own pocket. Insurance is one area where you don't want to cheap out.
