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Car-rental firms, insurers vary on loss-of-use policies

Car-rental firms including Dollar and Hertz will charge for loss of use for repair time in the event of an accident. Some insurers cover this. If not, you can pay an extra fee or take your chances.

March 09, 2012|David Lazarus
  • Dollar Rent a Car, like some other companies, will cover loss of use for an additional fee if the renter's vehicle is in an accident. Above, a location in New York.
Dollar Rent a Car, like some other companies, will cover loss of use for an… (Chris Hondros, Getty Images )

Ernie Tamminga was in Tucson recently for a family reunion. While there, he rented a car. And, like all rental-car customers, he was offered insurance by the company, Dollar Rent a Car, in case of an accident.

Tamminga, 69, of Goleta had done his homework. He knew that insurance provided by rental firms, which can run more than $25 a day, is often unnecessary. Coverage you already have for your own vehicle should be sufficient, not to mention extra coverage provided by many credit-card issuers.

But Tamminga was unprepared for the Dollar rep's warning that he may still be on the hook for "loss of use" — that is, the rental-car's losses for having its car out of commission for repairs.

"I'd never heard of that," Tamminga told me. "So I bought their insurance just to be safe."

Now that he's home, he wants to know whether he did the wise thing or got snookered by an especially clever sales agent.

The answer is: It's hard to say.

First of all, not all rental-car firms will ding you for loss of use. Hertz does it, according to the company's website. So do Avis and Budget, according to their sites. Enterprise says some rental branches charge for loss of use, some don't.

Typically, a per-day loss-of-use charge will be the same as a daily rental fee. So-called administrative fees may also get tacked on for good measure.

Some rental-car agents use loss of use as a way to entice customers who might be disinclined to purchase more insurance to fork over some extra cash. As Tamminga discovered, a common sales pitch is to state unequivocally that a customer's personal coverage or credit-card insurance won't extend to loss of use.

True?

"It really depends on the policy," said Robert Passmore, senior director of personal-lines policy at the Property Casualty Insurers Assn. of America. "In some cases, loss of use is covered. In some cases, it isn't."

The vehicle website Edmunds.com is more emphatic. "In most states, auto insurance policies don't cover this loss, so if you have an accident, you may wind up having to pay this charge out of your own pocket," it says.

Only Alaska, Connecticut, Louisiana, Minnesota, New York, North Dakota, Rhode Island and Texas require insurers to cover rental-car loss of use as well, Edmunds says.

As for credit cards, Visa is said by travel experts to be more generous when it comes to paying loss-of-use charges than MasterCard and Discover. American Express takes such things on a case-by-case basis.

Complicating matters, card issuers may demand to see the rental-car firm's "fleet utilization logs" to prove how long a vehicle was being repaired. However, rental companies may be reluctant to share such information, claiming it contains trade secrets.

That can result in the card issuer refusing to pay for loss of use.

"You don't want the moment of truth to be when you're standing at the rental-car counter," Passmore said. "As much as possible, you want to know in advance what the insurer's or card issuer's policy is."

And even if you know that loss of use won't be covered by your personal policy or plastic, you still have to decide whether the potential charges are worth the cost of signing up for a rental-car firm's own insurance plan.

"This is where it gets a little tricky," Passmore said. "The company might claim it took a month for repairs when it should have only taken three days."

If the rental-car company won't share documentation about the nature of the repairs that you can verify with an independent mechanic, you may be in a situation where you just have to take the company's word for things.

That's where lawyers may have to be called in. Obviously, you'll want to think twice before splurging on an attorney if only $100 or $200 in loss-of-use fees are at stake.

So what's my advice? First, do your homework and see what your personal policy and your credit-card issuer will handle when it comes to rental cars.

If most accident-type circumstances are covered, I'd probably steer away from extra insurance if the only thing outstanding was loss-of-use fees.

Ultimately, though, you're taking a chance. And as with all matters of risk, you want to stay within your comfort zone. If you'll sleep (and drive) better knowing you're insured for any eventuality, that may be worth an extra $15, $20 or $25 a day.

Just make sure you're doing it because it's your decision, and not because some rental-car service rep bullied you into it.

David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5. Send your tips or feedback to david.lazarus@latimes.com.

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