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Coverage and Claims

Rental Cars and Acts of Nature - What's the Cost?

You might be liable for the costs of repairs if your rental car is damaged by "acts of nature or God."

Companies like Hertz are not reinventing policy or traveling a different path than their competitors on this matter. "This is not new for us," points out Richard Broome, Hertz vice president of corporate affairs, in Park Ridge, N.J. "That provision has been in our general contract for [awhile]," Broome noted. "Our competitors such as Enterprise have been doing this for quite some time, and now we're implementing this for all our other customers as well," said Broome.

Insurance industry executives Dan Kummer and Janine Gibford weigh in with practical coverage advice. For starters, Kummer issued a cautionary message on the subject of major car rental companies that have changed their contracts to discontinue coverage of damage to vehicles caused by "acts of nature or God" such as earthquakes or floods.

"If you don't check (rental agreements) carefully before signing on the dotted line, you could get burned," said Kummer, director of auto insurance for the Property Casualty Insurers Association of America (PCI), an insurance trade organization based in Des Plaines, Ill.

On the plus side, "acts of God" are usually covered under an auto insurance company's comprehensive coverage, Kummer continued. However, Kummer urges rental car customers "to make sure that you have that protection written into your contract and be sure to ask about that if you have any concerns in that area."

Whether or not you file a claim over damage caused by acts of nature, auto insurance rate increases down the road could occur because of Hurricane Katrina. "That wouldn't surprise me," acknowledged Kummer, who said that all sizes and types of insurers "took massive claims hits in the aftermath of Hurricane Katrina's devastation" in Louisiana and elsewhere in the South. (Katrina in 2005 caused some $38 billion in insured property losses and reportedly produced about $1.8 billion in motor vehicle losses in the South.)

There's no shortcut to reading the rental car agreement, according to Janine Gibford, vice president of state affairs for the American Insurance Association, in Sacramento, Calif. "These contracts are often very long and not written in plain language, so that can make it difficult for the car rental customer to understand all the terms and conditions," says Gibford.

Adds Gibford: "It's a good idea to read through the contracts even though they are not exactly written for a layman's edification. If you have questions, find out from your insurance provider what coverages from your personal auto policy will extend to the rented vehicle and then ask the rental car sales representative what portion of the rental car policy covers exposures that your personal auto policy doesn't address."

"Ask the rental car company what are the coverage exclusions specified in their contract such as damage caused by acts of nature," concludes Gibford. "Do not be afraid to ask questions when the rental company asks you if you want a 'collision waiver.' A 'collision waiver' is something a customer pays extra for, and you probably won't need that protection from the rental car company because that exposure probably will be covered in your personal auto policy. However, that's something you'll want to check with your insurance provider before agreeing to anything about that with the rental car company."