Qustion: Our rental car was sideswiped by a tour bus when my wife and I were on vacation. We rented the car from Dollar, but we declined insurance because we have an auto policy with Safeco and a rep said we'd be covered if we had an accident. Safeco paid most of the $4,000 claim but refused to cover charges for what Dollar said was the car's diminished value, loss of use and administrative fees. Those totaled $1,050. Help! - Jeffery Fear, Los Angeles
Answer: What a rotten way to end your vacation. You were smart to check your auto policy beforehand so you knew whether you needed the rental company's pricey insurance (called the collision/loss damage waiver, or LDW), which runs $15 to $30 a day.
Problem is, rental-car firms are increasingly tacking on new fees when a car is damaged, including diminished value (to reflect the reduced resale potential of a damaged car), loss of use (to cover lack of revenue while a car is repaired) and administrative fees (to process claims).
Not surprisingly, most insurers balk at paying for anything beyond repairs and what they deem is reasonable for loss of use. The same goes for credit-card issuers (see the Tip below).
When I contacted Safeco, spokesman Paul Hollie agreed to reimburse the $1,050 because you didn't get complete information when you called to verify coverage. He added that Safeco has since struck a deal with one rental-car company (Enterprise Rent-A-Car) that covers those fees. Safeco is also considering offering a rider that would cover them at all rental companies. In the meantime, unless you use Enterprise, the only way to make sure you won't pay out of your own pocket is to grit your teeth and buy the LDW.
But look at it this way. The average driver gets in only one accident per 285,000 miles driven, according to the AAA Foundation for Traffic Safety. And if you've got a comprehensive auto policy, even if your rental car gets massively wrecked, you'll probably be on the hook for only a small portion of the damages. So long as you have a cash emergency fund (and you do, don't you?), bypassing the LDW may be a calculated risk worth taking.
Tip: Many credit cards boast of providing rental-car insurance, but most pay just for physical damage that your regular policy won't cover. Only Diners Club and a few versions of AmEx, MasterCard and Visa offer primary coverage.
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