The Rental Car Company Rip Off

Chris Garlasco, Owner & Managing Partner - Founders Insurance Group

Awhile back, my bride and my father in law took a father/daughter “bonding” trip to Las Vegas. I went on line and shopped for a rental car. I found a great, off season rate of $23 per day. When my wife arrived in Vegas, she went to the rental counter to finish her paperwork and pick up the keys to the car. She was interested in taking out the insurance coverage since our auto policy, like almost all auto policies, covers the rental for collision, but not for loss of use. The rental agent informed her that the coverage would cost $22 per day!

This practice is wrong on so many levels – so let’s start with the obvious one first, the cost. Remember, this coverage from the rental company is not a full auto policy. It is a partial policy at an outrageous price. Assuming that the rental car is on the road daily, that’s an annual insurance cost of $8,030 for a partial policy! How does that stack up against your personal auto rates? In most states, the insurance department requires rate approval. I question if the rental car companies are subject to the same rate approval process. Secondly, every state requires the individual selling insurance to be licensed before offering coverage advice. The rental car companies seem to skirt this law as well.

Thirdly, if you carry collision coverage on your personal policy, that collision coverage extends to the rental. Since this is a big money maker for rental companies, they have decided to charge you for the loss of use, meaning that your insurance company may fix the damage, but the rental company will charge you the daily rental rate while the car is in the shop, which is not covered on your personal policy. It could add up to weeks of charges. The rental company doesn’t have much of an incentive to fix the car quickly since they are getting their daily rate from you. In addition, even if you have a reputable insurance company, the rental company may place a large hold on your credit card while awaiting payment!

The bad news is that unless your state has taken some action against these practices, and some have, you are really leveraged into buying into this scam. I know that some of you are thinking that your credit card company’s coverage will fill the gap. Think again, usually that coverage is quite restrictive.

In the end, you will have to decide how much risk that you want to take on personally. As you can tell, I am passionate about this subject! Does it make you angry? It should. Don’t get me started next on their “pre-pay for your gas” gimmick ………

Thanks for your valuable time!

Your Humble Risk Manager,

Chris Garlasco