The Short Answer: It Depends on Your Policy
This is a tricky question. Yes, the majority of insurance policies out there will cover you while you’re driving a substitute vehicle with the same coverages that you have on your auto policy. You need to read the fine print of your policy to make sure. But there are some restrictions to what is covered.
What is Covered?
Most auto insurance policies only cover the physical damages of the rental car and the liability. This is only if you have physical damage coverage on the vehicle that you are substituting. If you have only liability coverage on that vehicle, then you will only be covered for liability in the substitute vehicle. However, if you have comprehensive and collision coverage, then you would be covered for comprehensive or collision, should that happen under the rental car. What is very rarely, if never, covered by your insurance policy is the loss of use or the diminished value of the rental car. You may wonder: what are those two things?
Loss of Use of the Rental Car
You pay a daily fee while you are driving the rental car. Depending on the rental car, it could be anywhere from $40-$75 per day – or sometimes more. If you wreck that vehicle, or if something happens to that car while you’re responsible for it, then the rental car company can’t rent that vehicle out. They will charge you the daily rate until the car is repaired. And that’s never the same amount as your agreed upon daily rental fee!
What We Recommend
We always recommend that you take out rental insurance from the rental car company. Their insurance will cover the loss of use of the rental vehicle. There are some credit card companies out there (for example: American Express) that offer rental protection that includes loss of use of the vehicle.
Most rental cars are relatively new, especially if you rent from a company such as Enterprise or Hertz. Once you have an accident in that rental car, it is no longer worth what it was before the accident. That is called diminished value. Your insurance policy is never going to pay for diminished value. If you take out the rental car coverage from the rental company, a lot of times it will cover that. This will need to be confirmed with the specific rental car company and its coverage policy.
Our agency always recommends that you read all of the fine print in your auto policy. But we do not recommend that you use your own auto insurance as a substitute for taking out the rental car carrier’s insurance.