Most of you will have to travel on business for your small company. Inevitably you will be standing at the rental car counter being asked if you would like additional insurance coverage: CDW, LSI, LDW, PAI or PEC.
What? What on earth is CDW (Collision Damage Waiver), LSI (Liability Insurance Supplement), LDW (Loss Damage Waiver), PAI (Personal Accident Insurance) and PEC (Personal Effects Coverage)?
Well, the short answer is:
CDW and LDW is for damage to the car by an accident, vandalism or theft.
LSI provides excess liability coverage, just in case.
PAI covers you and all passengers in your vehicle for any medical expenses.
PEC provides coverage for theft or damage to personal items inside the rental car.
Sure enough a client of mine, tired and jetlagged, checked one box (PEC) and not the others. Got in a car accident (a minor fender bender while in Atlanta) which was his fault and it cost the company $7,700. My client reimbursed him (they had no Travel Guidelines that outlined what to do at the rental car agency). The long term solution? They have guidelines now that explain insurance options for rental car coverage.
Typically, travelers are advised to decline offers by the rental car company for additional insurance coverage. Why? Insurance coverage can come from one of many sources:
- your own personal automobile insurance may offer coverage for rental cars
- the credit card for which you booked the rental car on could offer coverage
- your corporate general insurance provider could offer coverage
- your personal health care policy or travel policy can cover PAI.
As a test I decided to check this out myself so I:
- contacted my insurance provider for my car and they said: do you have the roadstar package? Yes, I do! Well then decline all the insurance requested by the rental car company - even for business travel.
- then contacted VISA and sure enough my credit card offers Collision/Loss Damage Insurance. Yeah again!
- unfortunately our general liability at Business Ready does not cover auto rental but it could for an extra fee.
- sure enough my travel insurance covers my PAI.
three out of four isn’t bad! However, check the fine print - there are restrictions (e.g. daily rental cost caps, countries of use, etc.)
So, what happened that the client had to pay?
Well, as luck would have it, the individual does not own a car (so the auto insurance didn’t cover it) and the credit card that he used (instead of the company credit card) was a basic card that did not offer coverage. Hmmm, tough lesson to learn on the road.
When it doubt pay the money at the rental car counter. It would have cost him $75 more to save the company $7,700. Ouch.
2 comments ↓
Hi Wendy,
Excellent article. Based on some personal experience and research, I wanted to add some further clarification to your posting (in no particular order).
1. In Canada (or at least BC), rental companies must provide you with third party liability (around $200k) which is basically the equivalent of LSI. It is included in the rental. In the US the requirement to include it varies from state to state.
2. The LSI provided by rental companies is actually rather small (~$1m) vs. your typical exposure - i.e. you are at fault in an accident and put the other driver in a wheel chair for the rest of their life ($5m+ in liability required). My insurance agent recommends purchasing a third party liability top up from BCAA which will augment the rental insurance with a few million more. Additionally, traveling sales people might want to add a general liability rider to their home/personal insurance for that just in case accident. It is $15 per day of rental.
3. I have a Visa Gold Card but it does not provide third party liability on rentals (so a ding on another car is not covered). American Express or a platinum card might cover it, but Gold Visa does not. My Visa does cover collision (damage to my rental) which duplicates CDW.
-Bill
It helps me to know about this. You have been shown importance of this topic. It will be inspired me always. My insurance agent recommends purchasing a third party liability top up from BCAA which will augment the rental insurance with a few million more.This is very nice post! I will bookmark this blog.
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