The rental car industry is proficient in creating insurance coverage options few renters should purchase but with some sense of importance in the title. One of those options is Personal Accident Insurance (PAI) which is often paired with the Personal Effects Coverage (PEC) we've addressed previously. At the most basic level, Personal Accident Insurance covers the occupants of the rental car in case of vehicular accidents, whether those result in injury or fatality. Like other forms of insurance offered by the rental car companies, it's expensive, the terms and conditions limit the actual coverage, and it's primarily just a profit center for the rental car company. Most renters discover that the insurance offering also happens to be entirely duplicative of coverage held elsewhere!
All of the Rental Car Companies Offer PAI
Why do all major rental companies partner with insurance providers to offer PAI? The same reason all other coverage options are offered -- it's profitable if a renter selects the coverage. For a fee of $10 or so per day (as in the Budget example above), the actual insurance provider (never the rental car company itself) has a cap on the payments that might occur in a major accident. Imagine a serious accident where the cap on medical insurance payments is $2,500. That's right -- for $10 per day plus taxes and fees, the cap on payments is likely to be $2,500 if something unforeseen occurs! Is there any other coverage where an individual is likely to spend $5,000 per year on coverage that's likely limited to a total claim of $2,500? It's about the most abusive insurance policy imaginable, yet the insurance commissioners of each state allow it to be sold.
How might this be duplicative?
We think about rental cars every day and most days of the year, at least one member of our team is in a rental car. As a result, we're exceptionally familiar with our insurance coverages and would never consider purchasing PAI. We simply have insurance options in the course of our daily lives -- both personal and commercial -- that takes care of any possible accident that PAI might cover!
- Life insurance -- a renter with life insurance is almost certainly covered if the renter were to perish while traveling; that's why individuals purchase life insurance! We also receive AD&D coverage through our credit unions and many credit cards while on the road.
- Personal automobile insurance -- a renter with medical payment, no-fault, or personal injury protection coverage on their personal car likely has coverage that extends to temporary rentals if there's an automobile accident.
- Other driver's insurance -- if there's another driver at fault in an automobile accident, their coverage may provide for medical payments (subject to state laws).
- Health insurance -- if the renter's not covered by their own car insurance or the insurance of another -- or if the accident is not automobile-related -- then the billing gets sent to a traditional health insurer.
If any potential accident is already covered by existing coverage, then Personal Accident Insurance would be an ill-advised use of funds.
Some companies admit the product is often pointless
The coverage provided by PAI/PEC may duplicate the renter's existing coverage. (Each company) is not qualified to evaluate the adequacy of the renter's existing coverage; therefore, the renter should examine his or her personal insurance policies or other sources of coverage that may duplicate the coverage provided by PAI/PEC.
There are Exclusions and Limitations
Personal Accident Insurance is for accidents. The coverage never covers illnesses and even though the amount covered is capped, there are still exclusions and limitations. The Hertz Global Holdings companies (Dollar, Hertz, and Thrifty) clearly specify that the renter is covered for all accidents (inside or outside the vehicle) while the passengers are only covered for an automobile accident.
PAI: provides limited benefits to the renter and the renters passengers for accidental medical expenses, ambulance expenses and accidental death benefits during the rental. If this optional coverage is purchased by a renter, the renter is covered twenty-four hours a day for all accidents, whether the renter is actually in the rental vehicle or not at the time of the accident. Passengers in a rental vehicle are only covered for accidents occurring while the passengers occupy the rental vehicle.
So who should buy PAI coverage?
No member of the AutoSlash team is ever going to purchase PAI. We would guess the service is beneficial for accident-prone, poor drivers with no health insurance. And if a renter falls into that category, there are many other coverage options the rental car company would be willing to tack on at high rates! After all, one of the reasons rental car coverage rates are so expensive -- aside from being a profit center -- is that adverse selection and moral hazard are already priced into insurance premiums!
Personal Accident and Effects:
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