Scrutinizing Rental-Car Agencies' Insurance Pitches
Wall Street Journal, March 29, 2005
One of the biggest decisions at the rental-car counter these days has nothing to do with the type or color of car to get. It is whether you need any of the array of add-on insurance policies being peddled by the desk agents.
A variety of factors have complicated this question for consumers, from changes in state-insurance laws to stepped-up sales pitches by the rental-car companies. Dollar and Thrifty, among others, give their employees financial incentives to sell more coverage. Insurance revenue represents about 15% of revenue for those two agencies' parent company, Dollar Thrifty Automotive Group.
Meanwhile, the list of insurance products being offered by rental companies has become dizzying in some cases. Alamo Rent-A-Car sells 16 different types of policies, including CDW Maxi Waiver Saver and Supercover. While a renter at any one location may have to choose among only four or five, when they rent in a different state, that same person could face a whole new set of policies, with different names.
There are essentially three basic categories of coverage offered: coverage for damage to the rental car (known as LDW and CDW); coverage for liabilities from damage to people or things outside the rental car (known as ALI, SLP, SLI and LIS); and coverage for injuries or loss of personal items inside the rental car (known as PAI and PEC, among other terms).
For consumers, the charges can quickly mount. In most states, for example, Hertz, which is owned by Ford Motor Co., charges daily rates of $21.99 for LDW for most car classes, $11.95 for LIS, and $5.50 for combination personal accident and personal-effects coverage.
So which polices do you need -- and which can you safely decline? There is no easy answer: It depends whether you have an existing auto or home-insurance policy, what credit card you use, and in which state you are renting.
An agent at Avis suggested a $24.95 combo deal. But it included coverage we already had.
It is, of course, a mistake to simply assume that you are fully covered by your auto policy or favorite credit card. No credit cards, for instance, offer liability protection, nor do they cover exotic or particularly expensive cars.
Still, a surprising amount of what the rental-car companies push is already covered by one thing or another. Starting a year ago, Visa began offering, on all its consumer cards, coverage for damage to rental cars. Most American Express cards, and all Platinum, Gold, and World MasterCards with credit limits of more than $2,000 cover rental-car damage or loss.
About 60% of auto-insurance policies in the U.S. cover damage to rental vehicles, according to the Consumer Federation of America.
To test whether rental-car agencies try to sell customers on policies they don't need, we rented five cars in four states on Easter weekend, using a variety of credit cards and rental companies. Beforehand, we did some research into the coverage offered by our cards and auto policies, so we knew what we needed and what we didn't need when we arrived.
The aggressiveness of the sales pitch varied greatly. After we told the agent at a Hertz in Manhattan that we thought our card would cover any damage to the rental car, one of the agent's colleagues popped her head into the room to offer a hypothetical about "Joe the drunk" crashing into our Toyota Corolla. If there is damage, "we don't go after the credit card, we go after the renter," our agent explained. (MasterCard had assured us just a couple hours earlier that its card would cover that.) "While we don't condone hard-selling tactics by our representatives, they are trained to provide customers with information and details about the services we offer," a Hertz spokeswoman said.
The agent at Avis, also in Manhattan, advised us to buy a $24.95 combo deal of four types of insurance. The package included policies we didn't need, such as personal injury (which was already covered by our health insurance.) The combo coverage can sometimes save customers money, said a spokeswoman for Avis, which is owned by Cendant Car Rental Group.
One thing to check before you rent: How generous the collision coverage on your auto insurance is. It is sometimes limited to the value of your car; if you have a jalopy and you -- or another driver -- crack up your Mercedes rental, you are on the hook for the difference.
An agent at the packed Miami Beach, Fla., National/Alamo outlet volunteered that our card (Delta Air Lines SkyMiles Gold Amex) and auto insurance probably had us covered -- she was right. Earlier, when we called the toll-free line for National/Alamo, owned by Vanguard Car Rental USA, to get some information about the insurance options, the agent's English wasn't good enough to answer our questions. When we asked for details on a policy he mentioned, he responded, "Your reservation number please?"
We told the agent at the Dollar Rent a Car in Union, N.J., we were "pretty sure" we were already covered through our auto policy. The agent called our auto insurer to check. At several points, we had to get on the phone and relay information back and forth between the agents. A spokeswoman for Dollar Thrifty said some Dollar franchises will call around for customers as a service.
In Sacramento, Calif., the agent for Enterprise Rent-A-Car Co. told us our auto insurance might have a hefty deductible. He also emphasized the inconvenience of filing claims with our insurance or credit-card company, saying his package offered "walk-away worry-free driving." After we declined twice, he backed down.