Finance gurus will tell you that you should drop the “Comprehensive and Collision” coverage on your auto insurance once the value of your car drops to the point that the insurer would automatically total your car in the event of any accident. The thinking goes that you shouldn’t waste the money on the premium when any money you get as a result of the accident will only be a few hundred dollars. In other words, the premium you’ll pay to maintain comprehensive and collision will be more than any settlement you would receive.
This is somewhat sound advice and the reasoning behind it is true. Why not cut your insurance bill if you have the chance and if doing so won’t leave you on the hook for thousands of dollars if you have a wreck? Well, as I found out, if you travel and rent cars, you might end up paying more to insure that rental car than you would to keep the extra coverage on your insurance policy. Here’s my tale and some considerations that you can take away from my mistake.
We switched auto insurers recently. As part of the switch, we decided to drop comprehensive and collision (C&C) on our “older than dirt” cars. We ended up chopping about $500 per year off our policy. Yay! That was great, until our next vacation came up. Fortunately, I had the foresight to call the new insurer to make certain that our rental car would be covered under our auto policy. It always had been with our old insurer but I wanted to double check. Imagine my surprise when she told me that our liability coverage would carry over to the rental, but since we did not have C&C on our personal cars we would have to pick that coverage up through the rental agency. It makes sense now that I know, but I never realized that carrying C&C on your personal policy was necessary to fully cover a rental car. That’s never a consideration mentioned by the finance gurus.
So we checked the price for insurance through the rental car company. It was $25/day. Over a two-week vacation, that would have added $350 to the rental car cost. Ouch. And that would only cover collision, not any damage done through theft, vandalism, or a storm, for example. We looked into other options, such as coverage through the credit cards that we could use to rent the car. Again, those policies would only cover collisions and the limit was often fixed at $25,000 dollars. That would probably cover the car but if we ended up with a bill higher than that, we’d be on the hook for the overage.
We called our insurer back. The cost to add C&C back on to the policy was $100. That was much less than using the rental agency’s insurance. (We learned that we only needed to have it on one car, not both, in order to cover a rental so we did still end up saving some money.) They also had an option where we could add C&C for just the duration of the trip. That was only a few dollars and the most economical option, but we decided to just pay for the whole year since we travel frequently and sometimes on very short notice. We didn’t want to have to remember to call the auto insurer before every trip and have coverage added. I was lucky enough that I remembered to call before this trip! I didn’t want to have to trust my aging brain to make that call every time.
In the end we did end up saving some money on our insurance bill, just not as much as we hoped. And we had to go through a little last-minute vacation stress while we tried to work out a solution to something that we’d always taken for granted. In summary, before you cancel C&C on your own car, here are some things to ask:
Do you frequently rent cars when you travel?
If you only rent every few years, it may be worth it to pay for the rental agency’s insurance. If you travel frequently you’ll probably find that any savings on your auto insurance are quickly eaten up by the high rental insurance rates.
Are you okay with exclusions?
If you don’t carry C&C on your car and use the rental agency’s insurance, or insurance through a credit card, are you okay with the exclusions? I noted above that we found that the insurance only covered collision, not theft, storm damage, or vandalism. While these are unlikely events they do happen and we weren’t willing to take the risk, especially since the car would be left in unsecured locations much of the time. We also didn’t like that the coverage offered by our credit card capped out at $25,000. That might be enough, but it might not be if we rented a newer car or got an upgrade to a nicer car.
Are you willing to “piece together” insurance if you have an accident?
If we’d used other sources for insurance, any accident would have meant fighting with our regular insurer for the liability coverage and then dealing with another party for collision damage. I’d much rather make one call and have it dealt with than to have to fight with multiple insurers who are going to do everything possible to force the other one to pay and drag out the claims process for months.
Does your insurer allow you to enable C&C just for the duration of your trip?
If this is an option, it can be very cheap and would work great for someone who rents infrequently. You just have to remember to make that call before every trip. If you forget, you’ll end up uninsured and hoping that your credit card offers insurance.
Do you have to have C&C on all your cars to ensure rental coverage?
We did end up saving some money since we only had to carry C&C on one car, not both. This can be a good money-saving compromise to dropping coverage altogether.
I never realized that rental coverage and C&C were tied together. Looking back I should have known because it does make sense, but none of the finance gurus who touted dropping C&C ever mentioned it. Now I know and I know that we’ll be keeping C&C on at least one car at all times. It’s far more economical (not to mention better for our peace of mind) for us than relying on other rental car insurance options.
(Photo courtesy of Chris Lawrence)