Do you know the meaning of these rental car terms?

There are certain things that are simply inevitable when renting a car. Aside from getting a car two classes down from what you ordered to begin with and being offered a tank of gas at an inflated amount, travelers are also tasked with filling out certain paperwork for their rental. Most importantly, travelers are always asked if they want supplemental insurance, a complete damage waiver, or a number of additional add-ons to their rental.


 In America, rental car companies often suggest it as a boost to their contracts, and a layer of protection if something happens to their car. Do you really need the extra insurance?

Before renting your next car, be sure you understand what these five terms mean. Otherwise, having either a good or bad experience could cost you dearly.

Primary Insurance Provider (PIP)

In the rental car world, the primary insurance provider, or PIP in short, is the first insurance policy that would cover either the damages or total loss of an automobile. For most travelers, this is the insurance company that protects a traveler's personal car.

However, this is not always necessarily the case. Some insurance policies will only cover the driver while operating an insured vehicle. Other policies may only cover the insured driver while operating their personal auto in their home country. Before waiving the additional insurance, make sure to understand if yourr auto insurance policy applies as a PIP to rental cars as well.

 

Secondary Insurance Provider (SIP)

What isn't covered by a primary insurance provider is sometimes covered by a secondary insurance provider, or SIP. Often considered as "credit card car insurance," the secondary insurance provider can assist travelers in covering additional costs associated with damages or loss to a rental car.

As an example: a bag or electronic device is stolen from a car by breaking a window. While the primary insurance provider may cover the broken window, they may not cover the goods lost in the car. As a result, the secondary insurance provider may cover the personal effects, after a claim has been filed and denied with the primary insurance provider.

Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)

Often called the "rental car insurance policy," the collision damage waiver or loss damage waiver absolves the renter from complete financial responsibility if the car is damaged or destroyed through the course of normal driving. If the authorized driver were to get in an accident, the CDW or LDW would waive the renter from liability of the loss of the automobile. This service comes with a nominal daily fee that can add hundreds of dollars to a rental car policy, and may be mandatory in some parts of the world.

While the waiver may look good, it isn't a complete "get out of responsibility free" card. many collision damage waivers include a non-negotiable deductible, depending on the rental company. In addition, if the driver was found to be acting recklessly (such as driving drunk), the collision damage waiver may be declared null and void.

Personal Accident Insurance (PAI) and Personal Effects Coverage (PEC)

While these two insurance products are often offered together as one package, these two different products protect drivers in different ways. Personal accident insurance, or PAI, offers coverage for bodily harm while driving in the rental vehicle. Supplementary to any personal health insurance, the personal accident insurance can pay for drivers' medical care if necessary.

Personal effects insurance, on the other hand, protects personal items that may be lost or stolen due to an accident or theft. If luggage is destroyed in a car accident, or if items are stolen from a rental car, then personal effects insurance may be able to cover the cost of replacing the items.

Supplemental Liability Insurance (SLI)

If a driver is deemed to be at fault for an accident, they may be forced to pay for more than just the damages to their rental car. Supplemental liability insurance, or SLI, can add additional liability protection to the rental contract than the minimum mandated by state law. If the insurance company were to be sued for the accident, then supplemental liability insurance could provide additional coverage for damages.

While SLI can add additional insurance protection, it may be redundant with protection already offered by auto insurance policies already in effect. If an auto policy extends to rental cars as well, then drivers may already have supplemental liability insurance in effect.

Though these terms may sound foreign, the difference in understanding could cost car renters hundreds or thousands of dollars. By knowing these terms, drivers can make better decisions about their rental car insurance needs.