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5 rental car insurance loopholes

Your credit card might cover your rental car, allowing you to decline the rental company's expensive coverage. Then again, it may not.

By Stacy Johnson Oct 28, 2011 10:24AM

This post comes from Jason Steele at partner site Money Talks News.

Money Talks News on MSN MoneyWhen you rent a car, hopefully your car insurance policy covers you in the rental as well. If not, perhaps you've relied in the past on the standard coverage offered free by many credit card issuers.


But did you know that the best-selling vehicle in the U.S. is excluded from Visa's rental car coverage? That vehicle is a Ford pickup truck. Virtually no trucks or open-bed vehicles are eligible for credit card protection.

After rewards, rental car insurance may be one of the most valuable benefits that your credit card offers. With the exception of a few products aimed at subprime borrowers, nearly every card offers rental car insurance. By declining the coverage offered by the car rental company, you should be covered by the policy included with your credit card.

Nevertheless, it's important to understand that there are five key loopholes in these policies that can leave you exposed to liability at the worst possible moment.


Types of cars. In addition to pickups, Visa and others exclude full-size vans and many vehicles considered to be sports cars. American Express specifically excludes SUVs. While some people reserve these types of cars, others are merely upgraded at the last minute when their first choice is unavailable. Before renting your vehicle, make sure it is not excluded.


Territorial limitations. Credit card companies seem to have a problem with countries that begin with the letter "I." That's the only way I can fathom why most rental car insurance policies exclude Israel, Ireland and Italy. But Iran and Iraq aren't excluded, so even that explanation makes no sense. Other exclusions can include Jamaica, Australia and New Zealand. No matter where you plan on renting a car, make sure the card you use will cover you. Post continues after video.

Method of payment loophole. The rental car insurance offered by your credit card is only valid when you use your card to pay for your rental. That sounds simple enough, but how is that used in practice? What happens when you use an award from a loyalty program, or a coupon for a free day?


Even though you might use your credit card to reserve your car and pay for taxes and fees, its insurance won't cover you if don't pay the base rate with your card. It's for this reason that I never redeem points or miles for a free rental car, because the extra insurance needed diminishes the value of the award. Fortunately, the use of a coupon code shouldn't invalidate your coverage, as long as you're still paying for most of the rental period.


Rental length. Ever thought of renting a car with unlimited miles for an epic cross-country adventure? That works fine -- unless you intend to be gone more than 15 days. If so, you aren't covered by Visa's policy, which excludes "rental periods that either exceed or are intended to exceed fifteen (15) consecutive days within your country of residence or thirty one (31) consecutive days outside your country of residence."


Agency agreement exclusion. All rental car coverages exclude any actions that violate your rental car agreement. While it sounds reasonable to exclude such things as commercial use or using the car to commit a crime, did you know that most agreements prohibit driving on unpaved roads? Consider that next time you rent a car in a rural area or to visit a national park.


There are other things you need to know about credit card coverage of rental cars -- too many to list here. So here are the links to some applicable sites. If you rely on your plastic, take a minute to check them out.
Another option

Except for the agreement exclusion, the way around most of these issues is to rely on the coverage from your existing car insurance policy or to purchase the overpriced coverage that the rental car company offers.

This coverage is so expensive that it can even exceed the price of the rental -- and it can cost hundreds of dollars for a longer trip.


American Express offers another possible option -- its premium car rental coverage. For $24.95 per rental, they'll cover you for up to 42 days with no deductible. Although this policy covers trucks and SUVs, it still excludes rentals in some countries. To enroll, you sign up your card once, and this policy is automatically applied when you use that card to rent a car and decline additional coverage.

More on Money Talks News and MSN Money:

Oct 28, 2011 6:01PM
I pay State Farm around $25 a year for complete rental car coverage which includes loss of use which the rental companies can charge you.
Dec 8, 2011 4:51PM

There are circumstances when your own additional rental car coverage STILL doesnt apply. For instance, when your covered personal vehicle is being driven by a policy covered family member while you are depending upon the same car insurance to cover you in your rental. They will only cover one car in use at a time.


It also fails to cover you if anyone but you or a driver listed onthe rental agreement is behind the wheel. This means that even if a spouse is a free additional driver, if his/her name isnt on the car netal contract they are not a covered driver.


For some rental companies all insurance is void if you take it over state lines, if you haul anything in/with it or even sometimes if you have a pet in it.


Even if you have rental car coverage on your own policy...go over the fine print of the agreement (yes that multiple page jacket they wrap the contract up in) very closely.


I worked for a car rental company for over a decade and the loopholes multiply regularly. Its a legal contract and once you sign it's pretty hard to fight the system.

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