Personal Effects Coverage for rental cars

Before you walk up to the rental car counter, it's very important to know whether you need to buy rental car insurance. The rental car company will try to sell you supplemental coverage, including collision insurance that protects the rental car itself and liability insurance in the event you cause damage to another person's property or injury to another person.

Neither of those policies will cover your own personal property that might get stolen or damaged. For example, if your coat or laptop gets stolen from the back seat of the car, the theft will not be included in CDW/LDW or liability coverage.

To fill this gap, rental car companies sell high-cost coverage with limited benefits through an insurance product called Personal Effects Coverage. But do you need it?


What is Personal Effects Coverage in a Rental Car?


Personal Effects Coverage typically costs about $2 per day and usually provides $600 of insurance coverage per person, up to a $1,800 maximum, for theft of personal effects. But PEC is typically lumped together with another product called Personal Accident Insurance (PAI), which can bring the total additional cost to $5-11 per day, depending on where you are renting, plus taxes and fees.

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If you rent from any of the major rental car companies, the PEC option will be fairly similar because the coverage itself is provided by third-party insurers:

It's important to know is that this insurance may duplicate coverage you already have through a homeowner's or tenant's policy, and that your personal policy is likely to be the primary coverage. This means that your own policy will typically pay out first, and when the policy limits have been reached, the PEC will kick in.

In addition, these policies tend to have exclusions and limitations. Typical exclusions 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." In other words, if the car is locked but items are stolen without a case of breaking and entering, PEC is not going to help.


The Risk of Not Buying PEC When Renting a Car


What happens if you don't have homeowner's or tenant's insurance and you decline the PEC? In a nutshell, if your personal effects get stolen or damaged, you have no recourse—even if the damage was caused by the rental car itself.

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In a fairly recent cautionary tale, Enterprise would not cover a renter's personal valuables after their rental car caught on fire. The renters had purchased CDW/LDW but not PEC, so the insurance covered the burned car, but not the renters' possessions. Alas, the vehicle did not have a known recall or defect, so there was no recourse.


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