Renting a Car on Your Vacation? Read This Before You Do!

When you go on vacation it is usually a mystery whether or not you need to buy the “extra” insurance coverage when you finally make your way to the rental counter. After traveling all day the last thing you want to do is read the five-page rental contract that 99% of the time people just sign.

Basically what you are signing (besides the rate per day etc.) is a valid contract where you acknowledge that you are responsible for whatever happens to the rental car including any lawsuit you get the Rental Car Company involved in. They don’t care whether it was your fault or not. This wonderful (insert sarcasm here) lopsided contract also makes you responsible for any damage to the other car or any other property damage you cause.

Perhaps you’ve asked this or heard someone else ask when the Rental Car Company employee asks you if you wish to purchase the extra insurance coverage: “Does my own auto insurance policy cover me for any of this”? The standard answer that they give is “every state is different so we can’t answer that question.”. The truth is they don’t know what is covered under your auto insurance policy.

The good news is that as long as you have Massachsuetts Personal (note the word: personal) Auto Insurance policy that has Collision and Comprehensive coverage, your policy will extend to cover the Rental Car as if it’s your own car. It is considered a “temporary substitute” under the Massachsuetts Auto policy. This means you do not need to buy the extra insurance they will try to sell you. Provided that:

  • You have an active Personal Auto Insurance policy
  • Your Personal Auto Policy has Collision and Comprehensive coverage
  • The Rental Car agreement is in your personal name (not in a business name- as it is a contract)

Other important things to keep in mind:

  • Your policy only extends/covers you while driving anywhere in (whether you’re driving your own vehicle or a Rental Car) the United States (It’s Territories and its possessions) and Canada. That’s it. Coverage will not apply to any other country.
  • Your Personal Auto Insurance policy will only cover personal type of vehicles. If you rent a U-Haul truck for example, your Massachusetts Personal Auto policy will not grant you coverage because a Box Truck doesn’t meet the definition of private passenger.
  • Your Personal Auto Policy work as excess coverage. The rental car does have some insurance coverage on it as they by law need to have at least minimum liability coverage. Usually it’s just liability coverage and again it’s minimal at best. Your Auto Insurance policy covers any expenses left over (as long as it’s covered under your Auto Insurance policy) after the Rental Company’s insurance coverage is exhausted. They simply transfer all the risk to you the renter via the five-page contract that no one reads and you just signed.
  • Your Bodily Injury to Others, Uninsured and Underinsured coverages will apply as excess as well. Theses coverages will respond should the Rental Car Company’s limits become exhausted.
  • The “Collision Damage Waiver” that they try to sell you will only pay your deductible. That’s it. Don’t think for one second that they won’t file a claim against your insurance policy to get the damage to the rental car fixed.
  • Some Credit Card companies offer some type of supplemental coverage that may or may not pay for the damage to the rental car by using their card. You’ll need to understand exactly what it will and will not cover if anything. Call them before you leave for your trip.
  • The Rental Car Company may hold your deductible or deposit hostage until the claim process runs its course.

Give us a call prior to renting a car to make sure you have all your bases covered.

 

Uber and Lyft Drivers….Good News!

Prior to May 1st only one company (USAA – market share 3.39%) offered an endorsement that would remove the TNC (Transportation Network Company-aka Uber, Lyft etc.) exclusion on every Massachusetts Auto Insurance policy.

The exclusion that IS ON YOUR POLICY stops all insurance coverage as soon as you the driver turn on the TNC app making yourself available to pick up fares aka the “standby period”. Uber and Lyft do provide some coverage during this standby period but it’s minimal at best.

Many insurance companies are now offering coverage via a Driver Coverage Endorsement which needs to be added to your current auto insurance policy. It DOES NOT automatically get added. You need to request that it be added (if available from your current insurance company or you’ll need to change insurance companies to one that does offer the endorsement) to your policy.

Uber and Lyft currently provide the following limits and coverages during the standby period. Again the standby period is when you are logged in and waiting for a fare.

Uber and Lyft provide the following coverage during the “standby period”:

  • Bodily Injury to Others with a limit of 50,000 per person and $100,000 per accident (maximum total for all people injured) and $30,000 for property damage. If you own a home or anything of value these limits are ridiculously low. If you hit another car for example and the damage is more than $30,000 (not difficult to do) you are legally libel for the difference.
  • There is NO coverage for Collision (in an accident they will pay for the damage to your car) or Comprehensive (Fire, Theft, Vandalism etc.). This is a huge issue.
  • There is NO Uninsured and Underinsured Motorists coverage during this period. This would provide coverage If you are in an accident and you are injured by an Uninsured Driver or an Underinsured (someone who doesn’t have enough insurance to cover the value of your injuries) driver. If the other person who is responsible for the accident has no insurance, the hospital is still going to make you responsible for the medical bills. If you don’t have health insurance or large deductible/copayments this could be a serious issue never mind pain and suffering, lost wages etc.

Uber and Lyft provide the following coverage while you are heading to pick up a scheduled fare or transporting that fare to the final destination:

  • Bodily Injury to Others Property and Damage Liability up to $1,000,000 for injures to anyone (not you the driver) in your car, the other car, pedestrians and any property damage you cause.
  • Collision and Comprehensive coverage with the following deductibles: $2,500 (yikes) with Lyft and $1,000 with Uber.

Again the Endorsement needs to be added to your policy. The cost for the endorsement is 7% of your premium and well worth it. There are a few eligibility guidelines but most of them are the same as the qualifications to drive for Uber or Lyft.

Temporary Card-Board License Plates

Let’s face it, the dealer’s’ job is to sell you a car.

Out of state dealers usually know the laws of their own state inside and out. Most of them will tell you that they will issue you a temporary (cardboard) license plate and it’s perfectly legal.. that is until you get to the Massachusetts state line.

Mass. law makes it illegal for Massachusetts residents to use a temporary plate in Mass…. Now what?

Communication between your insurance agent, the dealer and you is critical to make sure everyone is on the same page. The best way is for the dealer to send the Certificate of Origin OR Title overnight to the agency and then we will get your plates for you. This way when you go to the dealership to pick up the car you already have the plates and the car is all ready to go.

Some out of state dealers insist that they will handle the registration of the car. This usually doesn’t work for a few reasons.

  1. First and foremost you have a car in your driveway which you can’t drive because again temporary plates aren’t worth the cardboard they are printed on.
  2. The dealer usually hires a third party vendor to go to the mass RMV to get the plates. This usually adds days and sometimes weeks as the paperwork needs to be sent by Fed-Ex back and forth between the dealer and the vendor and then ultimately you.

We have situations over the years when the first payment was due on the loan before the client actually got the plates. Our suggestion is if you are going to buy a car from an out of state dealer go over the process with them getting a timeline of when you will get the plates before you sign the paperwork.

Their ultimate goal is to sell you a car, it’s a good idea to keep this in mind.

Buying a Car From an Out of State Dealer?

Sometimes buying a car from an out of state car dealer isn’t worth the potential savings. 

Here’s a few things you should know before getting started:

  • Unless the dealer location is close to Massachusetts, chances are the dealer is not registered with the Massachusetts Department of Revenue (Mass DOR).
  • This is important because the Mass DOR will not give you credit for the sales tax on the car you’re trading in.
  • This means you will pay sales tax on the purchase price of the new car and not the difference between the new car and your trade. This could results in hundreds or even thousands of dollars. 

**An example of this would be if you bought a new car for 40k and the dealer gave you 30k for your trade in: 

  • If the dealer is registered with the Mass DOR you would pay sales tax on the 10k difference which is $625.
  • If the dealer isn’t registered with the Mass DOR you would pay sales tax on the full purchase price of 40k (no credit for the trade) which means the sales tax you would pay is $2500. There goes the potential savings as your out of pocket cost just went up $1,875.

Over the years we have run into this situation many times. Some dealers will register with the Mass DOR and have told us that the process for the dealer to register is very easy.

We once had a client buy a motor-home in South Carolina and the trade in was worth 70k. He called the dealer and tried to get them to register with the Mass DOR but the dealer refused to do it and it cost him an extra $4,375!

Bottom line is to check with the out of state dealer BEFORE you buy a car from them!