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Raising the Stakes in Rental Car Coverage (Summer 2015) << Back
In a previous newsletter article, we pointed out the coverage gaps that exist between the contract that you sign at the rental car agency and your personal auto policy.  We listed the “Top Five Reasons to Buy LDW/CDW” from the rental car company.  Recently, rental car companies have made purchasing this coverage even more important.  Why?  Because rental car contracts now include a “diminution in value” clause.   Diminution in value is NOT covered by your personal auto policy or your credit card company.
Example:  You rent car with an estimated value of $30,000 and bring it back damaged.  The cost to repair the car is $8,000.  Your rental car company has two options:
      a.  Fix the car.   You are responsible for the $8,000 for fixing the car.  This portion could be covered by your personal auto policy depending on your auto physical damage coverage.  However, the rental car company may be reluctant to put the vehicle back into use because of the damage caused by the accident, so it immediately sells the car.  Because the car brings a lower price than normal, the rental car company also charges you for “diminution in value”.  This charge represents the reduction in a vehicle’s market value due to the vehicle being involved in an accident.  Recently, an AHTKY client was sent a diminution in value invoice for over $2,000 following an accident involving just $1,900 in damage to the rental car!
       b.  “Before and After”.   Your rental car contract contains a clause that reads:  “If the car is damaged, you will pay our estimated repair cost, or if, in our sole discretion, we determine to sell the car in its damaged condition, you will pay the difference between the car’s retail fair market value before it was damaged and the sale proceeds.”  In this situation, the rental car company (at it’s sole discretion) decides not to fix the car but to sell it in it’s damaged condition on the open market.  Because of the damage, the rental car company receives just $13,000.  You are presented with a bill for the difference between $30,000 and $13,000, or $17,000.  You will receive, with the proper coverage on your personal auto, $8,000 (minus your deductible) from your insurance company, and will be left with out of pocket expenses of $9,000!
Please contact your insurance professional at AHTKY Insurance if you have any questions regarding rental car coverage under you personal or commercial auto policy.
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AHTKY Insurance Agency, LLC
1451 W. Artesia Blvd, Suite A, Gardena, California 90248
CA License: 0C46036