Demystifying car rentals in the US – Insurance, Additional drivers & More!

We’ve rented cars around the world – Dubai, Oman, Brazil, Spain, etc. However, this time around – for our trip in the US, our car rental needed some serious research. Why, do you ask?

 

Insurance

Car rentals in the US become really complicated because of insurance requirements. Ordinarily, a car rental quote in most other countries will include insurance in your price. However, in the US, car rentals do not ordinarily include insurance. This is because motorists’ personal insurance policies in the US often cover their car rentals as well. Couple that with separate state mandated minimum insurance requirements, 3rd party liability claims, and car insurance in the US for foreign drivers becomes a pretty complicated affair!

I’m going to attempt to demystify your car rental insurance options in this article. I’ll also try and help you decide the most cost effective, yet relatively secure way of hiring a car in the US.

Let’s get started with a basic primer on all the different kinds of car insurance that there are in the US:

 

CDW – Collision Damage Waiver

This is the most standard insurance that auto rental companies in the US will offer foreigners. What this means is that any damage to your rental car is taken care of by the insurance. However, some CDW policies may include a small excess fee (like $100). What this means is that you will have to pay the first $100 towards any repair work. eg: Say you have an accident and your car needs a new fender. The new fender costs $500. You will have to pay $100 and the insurance company will cover $400.

Sometimes you can get CDW with a $0 excess. In the above case, the insurance company will cover the full cost of repair. Ideally, for complete peace of mind, you will want a CDW with $0 excess. This might cost a little more but you won’t have to worry about the little stuff.

 

SLI – Supplemental Liability Insurance

Now it starts to get complicated, so let’s do this with an example. Say you have an accident, your tyre blows out and you veer off the road, into a farm and crash into a barn. You didn’t injure anyone but you did cause some property damage. Here’s where it starts getting a little bit confusing. Every state in the US has a minimum sanctioned liability coverage. What this means is that your car rental provider *will* have some minimum liability coverage depending on the state that your rental originates in. This makes things pretty complicated. Say you rent in California, you’ll have a coverage of just $5,000 with your rental. In Utah, your coverage will be a bit higher. There’s also coverage for bodily injury, etc.

However, let’s remember that the US is a significantly litigious country – they like to sue people here. So if you destroyed Old McDonald’s barn, he may want some compensation. If he decides to sue you or the rental car company, you will be liable for the damages that the court orders. This is where SLI comes in. The coverage that SLI provides is usually $1 Million. That’s a lot of money for a barn! Basically, with SLI you can rest assured knowing that no matter how many barns you drive into, you’re probably covered.

This can also double up as insurance against claims made by other drivers who may not have any insurance themselves or for bodily harm/injuries.

 

Theft, Fire, Hail, etc.

Usually most CDWs will include protection for the above issues. Make sure you check your CDW terms carefully and if you’re going to be parking in dodgy districts you should make sure you have theft insurance. We didn’t bother with this.

 

Personal Effects Insurance

In case your car gets stolen with valuables that you left in it, your valuables would be insured in this case. This insurance is a bit useless because you must always weigh the benefit of your insurance policy against the likelihood of making a claim and having that claim granted. For Personal effects, it’s a bit hit or miss. Don’t bother unless you’re transporting diamonds.

 

Passenger Insurance

You won’t need this unless you came to the US with no medical insurance. (bad move by the way!)

 

Insurance Option #1

Now that we’ve discussed the various forms of insurance, it’s important to understand how to go about getting the best possible insurance deal. For most use cases, a CDW and SLI are enough for you to drive off care free. What that means is that if you hit anyone, you’re okay. If they hit you, you’re still okay.

So if you head to kayak.com and look for a car rental, you’ll probably find deals that go as low as $11/day – these cars do not include any insurance. Usually they will offer you a CDW which will be approximately the same price as the rental quote, so $11/day extra for CDW. Then, you’ll probably want to add an SLI when you get to pick up your car, and they’ll tack on another $14/day and you’re suddenly paying $36/day for a $11/day initial quote.

 

Insurance Option #2

What’s interesting is that most car rental websites based outside the US (say avis.co.uk or hertz.co.uk and so on..) will offer you car rental quotes with all the insurance you need. These are usually pretty good deals and will work out a few dollars a day cheaper than a US originated rental with the extra insurances added. This is because there are thousands of travelers coming every year from the UK to the US and renting cars and these guys would rather sell proper insurance packages than deal with lawsuits.

 

Insurance Option #3

However, and here’s where it gets really interesting. There are also agencies in the UK that will SELL you insurance policies. These insurance policies normally cover everything (CDW, SLI, Theft, etc.) and cost GBP 99 for an entire year’s worth of insurance. You can also add additional drivers to the policies for about GBP 50. They support direct billing with the car rental company for larger claims. For smaller claims, you will have to pay in the US and when you return to your home country, file a claim to get a reimbursement.

However, there’s a catch here: any additional drivers must be named on the rental contract.

 

 

About additional drivers

The issue with additional drivers needing to be named on the contract is a big one. A lot of rental car companies in the US (avis, hertz, etc.) will let your spouse drive free. In some states (California, Nevada, etc.) spouses are mandated additional drivers by law. However, in all of these cases, the additional driver’s names are not added to the rental contract. I had actually spoken to the 3rd party insurance agency in the UK and they said that for a claim to be valid – the additional driver’s names *must* be added to the rental contract. Bummer!

 

The Math Problem becomes tougher

So now we have a situation. Say, Zara and I rent a car in the US. We could either go with Option #1 and drive off into the sunset paying $36/day + tax for our car rental. We could go with option #2 and since we’d be booking with avis or hertz, we would get an additional driver free, however, the insurance premium tacked on to our quote may make things a bit expensive.

We could also get the 3rd party insurance policy but in this case, we could not use the ‘spouses drive free’ provision. However, adding an additional driver normally costs $8-$10 per day in the US. These additionals are subject to maximums as well. What this means is that most states have laws that say:
 

Car rental agencies can charge $10/day for an additional driver subject to a maximum of $100 per rental.

 
What this means is that if we get the 3rd party insurance (option #3) for GBP 99 + GBP 50 = GBP 149 for coverage for two people (Zara and me) and then get the car from Kayak that costs $11/day. We could still add an additional driver for $10/day and for our 28 day rental, they would have to charge us $100 instead of $280. The $11 quote on Kayak came to $506 for 28 days (about $7/day tax, etc.). Add another $227 (GBP 149) for insurance and $100 for the additional driver and our car rental would come to $833 for the entire 28 day period! What’s more, we would still have insurance coverage for the rest of the year so any future rentals would not need insurance whatsoever!

Here’s another tip, in California, we would’ve saved the $100 for an additional driver. California law says that
 

No charges shall be levied for additional drivers on car rentals originating in the state of California.

 
This means that adding additional drivers to your rental contract is free for rentals originating in California. Shame that our rental was starting in Utah!

 

 

About One Way Rentals

Now there’s the question of one way rentals. Often you will make the most of your trip if you start somewhere and finish somewhere else, unless you do a rather interesting loop through different regions.

Our car rental starts in Salt Lake City, Utah and ends in Los Angeles, California. One way rentals are a huge cost with smaller agencies. Most car rental companies will tack on about $250 – $400 for a one way rental. This is just a cost that you’ll end up paying. Hertz does have some free one way rental offers but I wasn’t able to get a reasonable quote from them. (usually the “free one way rental” gets factored into your per day quote so you pretty much end up paying the same!)

I got the $11/day quote from Fox Rent a Car via Kayak. The total with our 3rd party insurance came to $833 as calculated above. However, add to this, their one way fee of $301 and suddenly the rate looks a bit less competitive. The new total becomes $1134 for a 28 day rental. That’s $40.5/day for a compact/economy car.

 

Shop around for deals

Car rentals can often have deals, especially just before you approach high season. While browsing around the Avis UK site, I noticed a tiny message saying “Spring Sale is On! Enter code”. So, I punched in my dates, my pick up and return points (Salt Lake City and Los Angeles), the spring sale code, and voila! got a quote on a LARGE (7 seater SUV) car for $1096 – all insurance included (remember the UK sites will include insurance) – and with an additional driver thrown in as well! (Avis lets spouses drive free). Funny enough, the compacts were more expensive, maybe the sale only included larger cars. Of course, we will end up paying a bit more for gas (which is cheap in the US compared to Europe, India, etc.) but the added benefit is a safer car as we’ll be handling some hilly/frosty terrain on this trip! The difference in gas costs makes up for the deal though so we get a bigger car from a more reputed agency for about the same price with all insurance included.

Remember that there’s also the added bonus of getting your insurance directly from your car rental provider. You won’t be stuck working out claims, etc. They’ll take care of it in the unfortunate event of an accident.

 

 

Conclusion

In summary, if you want to get the best car rental deal in the US, you need to know what kind of insurance you want. Once you know that (usually CDW and SLI are enough) you can shop around. It’s always best to check UK or European sites from car rental agencies as they will have insurance thrown in. There are also sites like carhire3000 which give you reasonably good quotes with full insurance. However, BEWARE that their quotes do not include additional drivers (you can sometimes add them online) and they NEVER include one-way rental charges. What will happen is that they will charge you the base price for the reservation and when you show up at the car rental counter, you may get charged a high one way return fee. It’s best to know what you’re going to pay before arriving at the car rental pick up counter. The best way to make sure? Pick up the phone and give them a call if you’re in doubt!

 

Hope you learned a bit about scoring good car rental deals in the US *with* insurance included. These things don’t usually come up in other countries as cars are supposed to be fully insured by the rental agencies.

 

Any questions?

Ask in the comments!