September 28, 2000 -- It is the worst single moment of many road trips: that fear-inducing instant at the rental-car counter when you're asked if you want to purchase any or all of a vast array of costly, unfamiliar insurance items.
The insurance that rental firms peddle is a maddening jumble of confusing acronyms--CDW, LDW, PEC, SLI--and the U.S. Public Interest Research Group says the coverage can add as much as 46 percent to the base cost of your daily car rental. More to the point, however, many experts say that most drivers don't need the extra coverage. Most Americans already carry it as part of their personal car or home insurance. Or it may also be offered free of charge by a credit card you already carry in your wallet.
Here's a quick look at what the rental companies sell, what they charge and how you can make intelligent decisions about the coverage you may need.
COLLISION DAMAGE WAIVER/LOSS DAMAGE WAIVER
Popularly known as CDW or LDW, this isn't insurance at all, but a waiver that relieves you of financial responsibility in the event of damage to or theft of the rental vehicle. At $9 to $25 a day, this option is often unnecessary for renters. About 70 percent of car owners are already covered by their personal auto insurance. (Most others can add it to their personal insurance for as little as $50 a year.) Some credit cards also offer this waiver free if you charge your rental to the card. American Express and the gold and platinum versions of MasterCard and Visa cards offer what is called "secondary" coverage. In other words, it covers whatever your personal auto insurance doesn't pay. But Diners Club offers a "primary" form of coverage that substitutes for your personal auto insurance.
PERSONAL ACCIDENT INSURANCE (PAI)
Car-rental firms charge as much as $4 a day for PAI, which protects you in the event of accidental death or bodily injury you suffer while using a rental car. Any renter with personal medical insurance is already covered.
PERSONAL EFFECTS COVERAGE (PEC)
Another item that could add $2-4 a day to your rental, PEC insures you against theft of or damage to personal items you carry in a rental car. Most renters already have this coverage as part of their homeowner's insurance. If you rent and carry renter's insurance, you're also covered. About the only time you might want to consider PEC is if your personal insurance has a very high deductible or if you don't have this type of coverage.
SUPPLEMENTAL LIABILITY INSURANCE (SLI)
Car-rental firms charge as much as $10 a day for this coverage, which protects you against liability for causing injury or death to others or damage to another person's property. Virtually all car owners already have some liability insurance as part of their personal auto insurance, but check to make sure you have enough. Experts recommend carrying at least $100,000 of coverage for property damage and $300,000 for bodily injury. The more you earn and the more you own, the more liability insurance you should carry.
THREE FINAL THOUGHTS
+ Even when useful, insurance coverage sold by the rental firms is hideously overpriced. At $9 a day, for example, CDW costs $3,285 projected over a year. That compares to perhaps $50 or $100 as an addition to your existing auto insurance. If you want full coverage for car rentals at reasonable prices, buy it from your existing insurance carriers as an addition to your current policies.
+ There are many subtle exceptions to the rules of insurance discussed here. For instance, if you rent large sport-utility vehicles or plan to drive on unpaved roads, you may need special coverage. Carefully read your insurance policy and the fine print of the coverage offered by your credit card.
+ Talk to your insurance agent before you book your next rental. A little preventative action will save a lot of money and grief. It'll also make you feel more secure when you decline the optional insurance at the rental counter.