The Top 10 Reasons to Purchase Rental Car CDW/LDW

/in , /by

This summer thousands of consumers will face the question, to paraphrase Shakespeare, “To purchase the CDW or not to purchase the CDW, that is the question.” It has been debated for years whether or not a person renting a vehicle should purchase the Collision (or Loss) Damage Waiver from the rental company.

IBA West and its national affiliate, the Independent Insurance Agents of America, known as the Big “I” recommend that consumers, in general, SHOULD purchase the CDW/LDW, at least for short-term rentals. Here’s why:

1.) Loss Valuation

The Personal Auto Policy (PAP) covers the lesser of the “actual cash value” of the vehicle or the amount “necessary” to repair or replace the damaged property. The rental agreement may very well contractually obligate you to reimburse the rental company for the “full value” of the vehicle. The PAP also does not pay for any “betterment” (increased value of new parts replacing old ones) of the vehicle, nor any “diminution” of value (if the market value of the vehicle after repairs is less than that before the accident).

2.) Loss Settlement

As implied above, there may very well be disagreement over the value of the vehicle or the amount charged for labor and materials to repair it. Your auto policy’s Appraisal clause may be invoked with its accompanying costs. More importantly, the insurance company has the right to “…inspect and appraise the damaged property before its repair or disposal.” However, the rental company, unlike you, is not contractually obligated to the insurer…it may choose to make the repairs immediately, potentially resulting in a lack of PAP coverage because of failure to comply with this contractual condition. In any case, purchase of the CDW usually allows the renter to “walk away” without the headaches involved in adjusting an auto claim.

3.) Loss Payment

The rental agreement may require immediate reimbursement for damages, and it is customary practice for the rental company to charge your credit card. This can create a significant debt, “max” out the card’s credit limit (perhaps shortening a vacation or business trip), result in litigation, etc.

4.) Loss Damage Waivers (LDW)

Rental agreements often make the renter responsible for any loss in value beyond normal wear and tear, regardless of the cause and regardless of fault. In order for your PAP to respond, you must insure at least one vehicle for both collision and other-than-collision (often called “comprehensive”) coverage. If not, your policy will not respond to rental car damage and loss of use claims.

5.) Indirect Losses

You will most likely will be responsible for the rental company’s loss of rental income on the damaged unit. Your policy has limited coverage for these charges.

6.) Administrative Expenses

The rental contract may make the insured liable for various “administrative” or loss-related expenses such as towing (e.g., one insured was charged for a 230-mile tow), appraisal, claims adjustment, storage, etc. Some of these expenses may not be covered by the PAP.

7.) Other Insurance

The PAP says that it is excess over: (1) any coverage provided by the owner of the auto, (2) any other applicable physical damage insurance, and (3) any other source of recovery applicable to the loss—travel policies, credit card coverages, etc. The potential
controversy over who pays what is obvious and can result in litigation. In addition, keep in mind that many states have statutes, proprietary policy forms, and/or case law precedents that may govern this and other rental car exposures.

8.) Excluded Vehicles & Territories

The PAP normally does not provide physical damage coverage for motorcycles, mopeds, motor homes, or other vehicles that are not private passenger autos, pickups, vans, or trailers. In addition, use of covered vehicles is limited to the U.S., its territories and possessions, Puerto Rico, and Canada (the rental agreement may also exclude operation outside a specific geographical area). If you rent a trailer (U-Haul, camper trailer, etc.), coverage is limited to $500.

9.) Excluded Uses & Drivers

The PAP may have limitations on use of vehicles that are not otherwise excluded by the rental agreement CDW or LDW. Also, the PAP may include an exclusionary endorsement for certain drivers or may apply only to designated individuals—the CDW will probably also only apply to certain individuals, but operators for which no PAP coverage is available may be afforded protection under the rental agreement by adding them as designated drivers.

10.) Additional and/or Future Costs

The PAP will most certainly include a deductible in the range of $100-$500 or more. In addition, payment for damage to a rental car may result in a significant premium increase (if not nonrenewal) via surcharges or loss of credits. Although most CDW/LDW fees are considered outrageous, if not unconscionable, we advise you to purchase the CDW/LDW for short-term rentals. If anything, this will give you peace of mind while on vacation or business, and it could save you from a lot of inconvenience and lost time and money.

Other Tips

When you rent a vehicle, you may want to look at the rental agreement in advance in order to determine your contractual obligations for damage…a few rental car companies post this information on their web sites. Here is a listing of several national rental car company web sites:

In addition, if you will be traveling abroad, check out www.auto-europe.com for information about driving requirements and rental car programs in Europe and other countries around the world.

Final notes to consider when renting a car:

  • Be sure to inspect the rental vehicle for existing damage to the interior and exterior and get their acknowledgement of such damage in writing before leaving the premises.
  • Be sure to take proof of insurance with you on your trip.
  • Carry an inexpensive disposable camera with you on your trip to document existing damage or damage that may occur while using the vehicle.

11 Ways to Save Money on Your Car Insurance

/in , /by

So you’re shopping around for auto insurance. What do you need to know? Well, there are lots of ways – at least 11 – that you can save money. Many of these money-saving ideas may apply to you.

1.) One Insurer, Multiple Policies

Do you have a homeowners or renters insurance policy? If so, is it with the same insurance company that provides your auto insurance? If the answer is no, you’re paying too much – for both policies. Almost every insurance company that sells auto insurance wants its policyholders to also buy homeowners or renters insurance from that company.

These insurers offer so-called multi-policy discounts. Usually, these discounts are at least 10% and some insurers apply the discounts to both the auto and the homeowners/renters policy.

TIP: Talk to your agent about multi-policy discounts.

2.) Good Driver, Good Price?

It’s no secret that the better your driving record, the less you will pay for auto insurance. But did you know that most people qualify as “good drivers” and are eligible for discounted premiums? Some good drivers pay a lot more than others, however.

Many auto insurers are actually a collection of several insurance companies in which each caters to a certain type of driver. The worst drivers go in one company, the best in another, and a lot of people wind up in one of the middle companies.

These middle people pay less than the worst drivers, but more than the best. The thing is, many of these middle people have driving records that are just as good as those who are insured by the companies that offer the lowest rates. Yet these middle people are paying more. Why?

The usual reason is that they don’t know any better. No one told them which insurance company in the group had the best prices. And, probably, no one told them there was even a group of insurance companies. If you have a spotless driving record, there’s no reason you shouldn’t be paying the lowest price a group of insurance companies has to offer.

TIP: Make sure you’re getting the best discount for your driving record. Talk to your agent. And remember, be a safe driver. It will save you money.

3.) The Beauty of the Bus (or Other Mass Transit)

Do you drive to and from work? If you do, you are literally paying a premium to do so. Insurance companies charge you significantly higher premiums if you drive to work. And, the longer your commute (in miles, not minutes), the higher the premium.

TIP: Some drivers should consider mass transit. Yes, there’s a price there, too. But you will reap the savings of gas and lower insurance costs.

4.) Low Mileage, Low Price

On average, people drive 1,000 to 1,250 miles a month. That is what insurance companies consider average use.

TIP: If you drive less than the average, you could be eligible for low-mileage discounts, which some insurers offer.

5.) High-Profile, High-Cost

The type of car you drive is a major factor in what you pay for insurance. Is your vehicle a magnet for thieves? Is it more expensive to repair than most cars? If the answer to either of the last two questions is yes, you’re paying more than the average car owner for insurance.

NOTE: To get detailed information on your vehicle(s) – or a vehicle you’re thinking of buying – write to the Insurance Institute for Highway Safety at 1005 North Glebe Rd., Arlington, VA 22201 and ask for the “Highway Loss Data Chart.”

6.) Raise Your Deductible

The deductible is the amount you pay before insurance kicks in if you have a claim. For example, if you have a $250 deductible and you have an accident in which your car sustains $1,000 in damage, you pay the first $250 and your insurer pays the balance, $750. The lower the deductible you choose, the more you pay. If you have assets, you can probably afford to absorb at least $250 and probably $500 if you have a claim.

TIP: If it’s been years since you’ve had an accident, you may be better off raising your deductible and paying less each year for insurance

7.) Drop Unnecessary Coverages

Let’s say you have an older car, one not worth very much. There’s really little point in having collision and comprehensive coverages. You don’t have much to protect. Remember, too, that you have to subtract your deductible from any potential payout you might get.

TIP: As a general rule, any car worth less than $1,000 shouldn’t have collision and comprehensive coverage. Between the deductible and the extra expense of these coverages, the cost is probably greater than the benefit. How much is your car worth? An auto dealer can tell you, or there are plenty of books that have values of vehicles going back many, many years.

8.) Discounts, Discounts, Discounts

Auto insurance companies offer several discounts for a variety of reasons. The car has automatic seat beats, air bags, anti-lock brakes, anti-theft devices, etc. The driver is a good student, which is especially valuable if you have teenage children who will be on your policy.

TIP: Make sure you are taking advantage of all the discounts available to you!

9.) Taking the Defensive

Many insurance companies also offer discounts to those who have taken defensive driving courses recently.

10.) Low-Cost and High-Cost Areas

Are you planning to move? If you are, you should take into account the cost of insurance. Generally, the more urban the area, the higher the premium. The costs can vary even within a community.

FACT: Rates can really vary from state to state. If you’re living in New Jersey, Massachusetts or Hawaii, you’re paying several times more, on average, than you would in North Dakota, South Dakota or Idaho.

11.) Credit Where Is (Or Is Not) Due

Is your credit record better than your driving record? If you have a good credit record, you could be eligible for discounted premiums from several auto insurance companies.

FACT: Many insurers now use your credit history as a major factor in determining what to charge you for auto insurance. In some cases, with some companies, you could save money by shifting your business to an insurer that uses credit as a rating factor – even if you have a so-so or poor driving record. There is another side to this coin. If you have a poor credit history, you could save money by moving your auto insurance to a company that does not use credit as a rating factor. Many insurers do not use credit as a factor.

TIP: Regardless of your credit status, you should talk to your agent to make sure
you have the best situation given your credit record, good or bad.

—————-

Whatever your driving record or coverage needs, you should shop around, or let an experienced insurance professional shop around, for the best deal for you. There are literally thousands and thousands of coverage options from hundreds and hundreds of insurance companies.

In addition, not only should you try to get the best deal you can, you also need to make sure you have all the coverage you want/need. Using an Independent Insurance Agent is usually your best bet to get the most value for your auto insurance dollar.

At All Insurance we take a personal interest in our customers. We like to share information to help you protect yourself and your family from financial loss. If you have any questions regarding this information or your insurance coverage, please don’t hesitate to give us a call 360.438.2797.