In our Primer on Rental Car Insurance, we speak extensively of the insurance options to protect the rental car itself as well as liability if a rental car user causes damage to property or injury to persons. We hope every driver thinks of these coverages before starting a rental but there's still potentially a gap. Insurance that covers the vehicle helps protect the vehicle; insurance that helps with liability protects an individual from damage to the person (or property) of others. Neither of those policies covers the renter's personal property. Leave a laptop (or human remains) on the back seat of the car and that potential theft is not covered.
Are the rental companies willing to help? Well, the rental car companies are willing to sell high-cost coverage with limited benefits through an insurance product called Personal Effects Coverage.
Personal Effects Coverage
The only option available through a rental car company that will cover damage or loss to personal property is Personal Effects Coverage (or PEC). Regardless of the rental car company selected, these policies work similarly among the major rental car conglomerates (AvisBudget Group, Enterprise Holdings, or Hertz Global Holdings) because the coverage itself is provided by third party organizations -- Avis, Enterprise, and Hertz aren't insurers. And like all services offered at the counter by the rental car company, the service is exceptionally profitable for the rental car company.
How profitable? Usually lumped together with another product called Personal Accident Insurance, the PEC product is ordinarily $7 per day plus taxes and fees. At more than $2,500 on an annualized basis, this limited coverage costs more than the premium for my homeowner's insurance and car insurance combined! What does one get for such an outsized premium? No much.
Paradox by the Dashboard Lights
If you've ever read an insurance contract, there are Terms and Conditions and Exclusions and Limitations. There's also a bit of a paradox.
- If a traveler has inexpensive possessions stored in a rental car, the traveler's has no need for PEC.
- If the traveler has expensive possessions stored in a rental car, the traveler's not going to be covered (or won't be fully covered).
Metallica affirms -- it's Sad but True. PEC is insurance that probably won't help much when it's truly needed. For the daily rate paid:
- PEC only kicks in after other coverage (like homeowner's insurance) pays out.
- PEC is usually limited to $600 per person (maximum of $1,800 per rental).
- PEC has copious exclusions.
How many exclusions? Here's Hertz's listing.
"ExclusionsPersonal effects not covered for loss or damage include:* Automobiles and their equipment, motorcycles, boats, motors or other conveyances or their appurtenances;
* Household furniture, currency, coins, stamps, deeds, securities, bullion, tickets, or documents;
* CB radios, radar detectors, GPS equipment, guns, merchandise for sale or fine art;
* Contact lenses, artificial teeth and limbs;
* Perishables or animals."
PEC also doesn't cover "loss by mysterious disappearance". It the car's locked but items are stolen without breaking and entering, PEC's not going to help.
What Happens When PEC Is Not Purchased?
Any rental car company's stance on insurance -- a product offered by third-party companies -- is straightforward. If a renter purchases a policy and follows the rules precisely, then a limited subset of personal effects would be covered. If a renter does not purchase a PEC policy, then no personal effects would be covered. Seems straightforward, right? Covered items damaged through accident or theft are easy cases. What happens when personal property is damaged when the vehicle itself fails (for lack of other description)?
My family has been the victim of "vehicle failure". We had an aged Volkswagen Rabbit decades ago that we used as a commuting vehicle. The car caught on fire on Pennsylvania Avenue* early one morning; it's a very disconcerting experience where the immediate goal is to get out of the vehicle rather than save personal property.
* Yes, southeast of The White House.
Sadly, bad things also happen to rental cars. One fairly recent example from Georgia calls out Enterprise for not paying for valuables after their rental car caught on fire. Although the incident was just reported to the media in July 2017, the fire occurred in February 2017. A few notes:
- NO MODERN VEHICLE should catch on fire during normal operations.
- If the automatic doors on the minivan are opening and closing while en route, we would have stopped driving.
However, there's a lot missing from the news reports (and questions that were unasked, such as "why now?"). Enterprise's stance in not covering the possessions is entirely expected. As the stories in the media state, the renter paid for insurance coverage that covered the vehicle itself but did not elect to purchase coverage to cover possessions.
The women said they purchased rental insurance on the car and were told the insurance wouldn’t cover their valuables lost in the fire, only the burned car.
Why did this unfortunate incident make the news more than four months after the incident? In public opinion, it's comparatively easy to go after the well-known rental car company to seek results. We're not lawyers (we work for a living) but that's probably the wrong avenue. If a loss is outside the scope of insurance purchased, it's hard to demand coverage simply by creating bad press against the rental car company. The news entities involved should have clearly asked more questions.
Any reader of our blog knows that we frequently disagree with the rental car companies but in this case, many things just seem wrong (including driving a vehicle where the doors open automagically). We could envision seeking recourse against Enterprise if the company had rented a vehicle with a known recall or defect; that would be a profound legal and ethical lapse. However, the most effective means of seeking recourse for a defective Kia Sedona erupting into flames is probably through Kia.
Ready to rent your next vehicle? After you review your insurance coverage to ensure all of your needs are met, click below to request the best possible quotes now!