One of the most frequent questions clients ask is whether they need to buy the optional insurance coverage when they rent a car. The good news is that if you are insured under a Minnesota personal auto policy, your obligation for damage to a rental car is covered! In addition, your Minnesota policy will extend your third-party liability, Uninsured/Underinsured Motorist and Personal Injury Protection coverages while you are driving the rental car.
What this means is that you probably don’t need to buy the extra covered offered by the rental car agency. I’m sure this comes as good news, as this feature of your Minnesota policy can easily save you anywhere from ten to fifty dollars a day in extra costs and fees!
The key is that you must have a personal auto policy issued in Minnesota. Other states’ policies do not cover damage to a rental car under Liability coverage. Typically, in most states, rental car damage is only covered if you carry physical damage coverage on at least one of your vehicles. But because Minnesota policies cover rental car damage under your Liability protection, it doesn’t matter whether you fully insure your own vehicle or not. Another benefit in Minnesota is that no deductible applies to rental car damage and you’re also protected against loss of use assessments.
Was your policy issued in Minnesota? A quick check of your insurance card should tell you. Look for the words “Minnesota Auto Policy” at the top of the card.
While your policy must be issued in Minnesota to work this way, you don’t have to rent the car within the Land of Ten Thousand Lakes to be covered. As long as you are within your policy’s coverage territory (typically the United States and Canada but not Mexico), your Minnesota rental car coverage will come with you. I do recommend bringing your Auto insurance card along on your trip, as the rental car agency may ask to see it. Also, please note that the out of state car rental shop is not likely to know how your Minnesota coverage works and may tell you things about your insurance that aren’t true.
A word of caution regarding drivers. As the renter of the vehicle, you will be responsible for any damage to the rental car regardless of who is driving. First, be careful not to break your contract by allowing someone else to drive who you didn't list as a driver on the rental agreement. Secondly, I have heard that some policies may exclude damage caused by drivers not listed on your Auto policy; so it's probably best to restrict driving to people listed both on your Auto policy and your rental car contract.
So what is considered a rental car? State law defines a rental car as a private passenger vehicle, including a pickup truck or van (as defined by statute). Also included is a rented truck with a registered gross vehicle weight of 26,000 pounds or less. This means that if you are moving and rent a UHaul or other similar truck, your Minnesota personal auto policy may cover any damage to it, as long as it is within this weight limit. (To find out the registered gross vehicle weight of the truck you will be renting, call the truck rental agency or check their website. Getting this in writing is best!)
Another stipulation is that you must also be renting the vehicle for no more than one month. If either your rental agreement or your rate of payment is based on a period of longer than a single month, it is not considered a rental vehicle and is likely not covered under your policy at all. In addition, the rental contract cannot have a purchase or buyout option.
Let’s say you were planning to vacation in Hawaii for two or three months one winter and found a company online willing to rent you a car while you are there. Unfortunately, if you rent the same car on the same rental agreement for your entire stay, your auto policy likely provides no coverage at all.
Another very important requirement is that you must be an “insured person" under the policy in question in order for the rental car coverage to apply. An “insured person” typically includes the policyholder (aka the “named insured”) and his or her resident relatives. Unfortunately, just because you are listed on the policy as a driver does not necessarily make you an “insured person” when renting or driving other vehicles.
Here’s a couple examples of when rental car coverage wouldn’t apply. First, let’s say you live with your significant other but are not married and the auto policy is just in their name. Whether or not you are listed on their policy as a driver, you’re probably not an “insured person”. You may be covered to drive their vehicle with their permission, but you’re not covered to drive or rent anything else, because you are not related to the policyholder.
You must also be a resident of the policyholder’s household to be an “insured person”. Let’s say your 22-year-old child finally moves out into their own apartment. However, to save them money, you keep them on your Auto policy. Unfortunately, we’d probably have to presume that they are no longer a “resident relative” and therefore no longer an “insured person”. While they may still be shown on your policy as a driver and still be covered to drive listed vehicles with your permission, they aren’t covered when they drive any other vehicles or when they rent a car.
One final word of caution relates to your auto policy’s Liability limits. State law requires your Minnesota policy to make available a minimum of $35,000 in Property Damage Liability for damage to your rental car, but what if you damage someone else’s vehicle in the accident as well? Or what if the car or truck you are renting is worth more than $35,000? Before you rent that vehicle, check your policy’s Property Damage Liability limit and whether you feel comfortable that it is enough.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.