Premium Rental Car Insurance Loophole?

Some of the top benefits that a credit car provides are realized when one rents a car.   While it is technically possible to rent a car without a credit card, it is extremely difficult.    Using a credit card at the rental car counter makes life a lot easier, and provides some limited insurance.

Standard Rental Insurance

The standard rental car insurance has all sorts of loopholes for just about anything other than a four door sedan.    The underwriters for your insurance can and will wiggle out of paying a claim whenever they can possibly find even the most minor violation of their several pages of fine print.   In addition, there is also a deductible of $500, making renters vulnerable to the increasingly common scam of rental car companies claiming an windshield chip or a door ding long after the car has been returned.

One option is to the additional collision damage waivers (CDW) and other optional insurances that are sold as a daily option.    Unfortunately, these are a terrible deal.    Take a look at these options from Budget:

These are optional protections on a rental that they are charging $15 a day for!    These are extremely high markup policies, as evidenced by the hard sell we often get at the rental car counter.  Any one of these per day charges, if multiplied by 365 days, would equal far more than any sane driver could expect to pay in car insurance annually.

American Express’s Premium Rental Car Insurance

Amex has an option for premium rental insurance that can be purchased for a mere $19.95 or $24.95 per rental (not per day) of up to 42 days, which eliminates the deductible and many exclusions while providing additional coverages.   When renting a car for more than a day or two, this coverage can be bought for just pennies on the dollar compared to the premium coverage offered by your rental company.

According to their website;

“The Plan covers most vehicles typically available from a Rental Company, from smaller economy sizes to large luxury sedans, convertibles, exotic cars (worth more than $50,000), minivans, vans, pickup trucks, and full-sized SUVs…..Excluded vehicles include: automobiles that have been customized or modified from the manufacturer’s factory specifications, except for driver’s assistance equipment for the physically challenged; any rented vehicle used for hire or commercial purposes; antique cars (cars over 20 years old or cars that have not been manufactured for over 10 years); limousines; and off-road vehicles, motorcycles, motorbikes, mopeds, recreational vehicles, golf or motorized carts, campers, moving trucks or moving vans, and trailers”

These inclusions are significant when you are renting an SUV or a premium car.   I would normally never think of renting an exotic car due to liability, but with this coverage, I would look forward to it.     This is a zero deductible policy that covers $100,000 for the $24.95 plan, $75,000 for the $19.95 plan.

How Does This Work?

You have to call Amex and sign up for the plan.   Once signed up, the charge will automatically appear on your card when you rent.  Once signed up, the coverage will apply to all Amex cards you hold.

Here’s A Trick

According to the Frugal Travel Guy, there is an interesting loophole that you can take advantage of is to rent a car with your Amex.   Assuming you did not have an accident, you can later choose to charge the rental to a different card.    Mr. Frugal claims that he has verified this information with Amex, and I have no reason to doubt this is true.    This is analogous to the situation I had when I got laid off of my last job.   I could use COBRA to enroll in my healthcare plan, and I had a long period of time where I could enroll retroactively.   I was able to wait until the end of the enrollment period before paying.   If I didn’t need to make a claim greater than the premium before I was able to find a new job, what would the point of enrolling be?

There are two problems I have with this plan.   According to my Ethics Of Reward Card Deals this seems to be squarely in the corner of a loophole deal.   There are no published rules saying that you can’t originally rent your car with one card, and then later charge it to another, so this is not against the rules.   On the other hand, something just doesn’t feel right about it, like it should be against the rules.    I am willing to let that consideration slide since, as I stated, rental cars companies will find any loophole to charge you and your credit card company will use any loophole to evade coverage in the event of a claim or an accident.

The other problem I have relates to the scam I mentioned where companies will find some hidden “damage” long after you returned the car.    In this case, switching cards won’t help as you would only switch cards when you feel there is no chance of a claim against you.    If you want to wiggle out of the $20-25 premium coverage, you just better be sure to photograph the vehicle, at the return lot, with some sort of proof, like a newspaper, that the vehicle is being photographed on the day of return.

All and all the $20-25 charge is a bargain when you are going on vacation for a week or more.  It is an essential coverage  if you feel like treating yourself (or get upgraded) to an SUV, a luxury car, or (please, please, please!) an exotic sports car.     Whether you want to wiggle out of paying for this good deal at the end of the rental period is up to you.