RENTAL CAR COVERAGE
If you are going on vacation, or renting a car for any reason other than business, you may want to know if you should purchase the collision damage waiver from the rental car company.
Your personal auto insurance policy, in most cases, insures a temporary replacement vehicle, like a rental car, for the same coverage that you have on your personal auto insurance policy. You have the same liability coverage and damage to the rental car is covered under the collision and other-than-collision or comprehensive coverage, subject to the same deductibles.
Some rental contracts state that you are liable for the loss of use of a rental vehicle if it is damaged and therefore cannot be rented until it is repaired. This is NOT covered by your policy.
Recently, some rental contracts have been revised to state that at the discretion of the rental car company only, they can decide that they do not want to repair the vehicle but rather sell it at auction. The contract states that you agree to compensate the rental car company for the difference in the value of the vehicle before the damage and the amount that they receive for the vehicle at the auction. You have agreed to this by signing the contract, so there is no recourse. This is NOT covered under your personal auto insurance policy.
The term that you should look for is diminishment of value. Unless you read the contract and know what you are liable for, we recommend that you purchase the loss damage waiver from the rental car company.
As an example, let's assume that you rent a car that is worth $20,000. It is involved in an accident that causes $10,000 damage. Your insurance will pay up to the $10,000, less your deductible. If the rental company doesn't want to repair the car and sells it for $7000, you are liable for the extra $3,000. That is the difference between the $13,000 loss in value and the $10,000 that the insurance company would pay.
Wisconsin law limits your responsibility to the actual damage repair. Rental car companies cannot hold you liable for diminishment of value in Wisconsin. This varies by state. Again, read the contract.
Also, check with your credit card company. Some cards include the loss damage waiver if you use that credit card for the car rental. Even then, the credit card may not cover diminishment of value.