Rental car fee you’ve never heard of can cost you thousands

“Loss of use” is a term included in nearly every rental car contract, tucked inside several pamphlet pages of tiny print that most consumers never take the time to read.

It means if you rent a car and get into an accident, you must reimburse the rental car company not only for the cost of fixing the car, but also for the lost revenue incurred every day the car is out of commission while it is being repaired.

“The reality is the rental car company is not able to rent that car while it’s out of service, and the rental car company is not at fault there,” explained Greg Scott, a public affairs representative for the American Car Rental Association (ACRA). “This isn’t a money grab. It’s simply making the rental car companies whole for the damage while the car cannot be in service.”

Loss of use wasn’t necessarily a big deal a few years ago. But it is now – thanks to the pandemic. That’s because a chronic car shortage means rental car prices have soared to record levels. And many body shops are backed up weeks – even months – waiting on parts.

So the days of a $30 a day rental car that could be fixed in a week are long gone. Under that scenario, if your $30-per-day rental car was damaged and required seven days in a body shop, a rental car company could charge you a $210 fee for loss of use.

But due to the pandemic, Brad’s rented Toyota Carolla cost $91 a day. And he knew it took 2-and-a-half months for a local body shop to make repairs to his own vehicle that had been rear-ended on the highway.

“I started doing the math and at $91 a day, that’s about $7,000 that I would have been liable for,” he said. “I literally could walk out of there, park my [rental] car on the street and some garbage truck runs into it while I’m asleep in my house, and all of a sudden I’m on the hook for $7,000. There’s an exposure there I don’t think most people are even aware of.”

And if you think your personal auto insurance policy will cover loss of use charges, think again.

Tom DeNapoli found out about loss of use the hard way when he traveled to Germany to show his dog at an international competition. Tom rented a small van in Frankfort. A few days later, someone backed into the rental vehicle in a parking lot, leaving a noticeable dent.

“It was an 8- to 12-inches circle, you know, this big,” he said, connecting his thumbs and forefingers to show the size of the dent, which he describes as “minor cosmetic damage.”

But after DeNapoli returned home, Hertz claimed that 12-inch dent was major structural damage. The total bill: more than $15,000.

“I was completely flabbergasted, obviously,” he told 13News. “They charged $15,000 for every nut and screw that they felt eligible to be replaced. They even charged for damage to the bumpers that had no damage at all.”

Included in that huge bill was $2,000 for Hertz’s loss of use. DeNapoli thought his personal insurance policy would cover the cost, but it did not.

“No, my insurance company said it will not cover loss of use at all. I would advise to look at the fine print for what they do cover because loss of use is beyond the scope of most insurance coverage,” DeNapoli said.

The Insurance Information Institute agrees.

“Loss of use isn’t something that’s standard on most policies. That’s why it’s important to check your policy. It’s something you’re likely going to have to ask for,” said Scott Holeman, the organization’s media relations director.

13 Investigates contacted the nation’s ten largest auto insurers to see if they cover loss of use involving rental cars.

Some insurance companies, like Nationwide and Liberty Mutual, said customers who purchase both collision and comprehensive coverage are covered for rental car loss of use charges. Geico and Farmers Insurance told 13News they do not cover loss of use for damage to rental cars.

Other insurance companies fall somewhere in the middle.

Customer service agents from State Farm and Travelers said customers who want to be insured against loss of use charges must purchase a separate rider or endorsement to their standard auto policy. USAA representatives told 13News their auto policies do not cover rental car loss of use charges, but members who reserve a rental car through the USAA Perks program might be covered against loss of use. American Family does not cover loss of use fees assessed by most rental car companies, but it does for its preferred rental car providers.

Some insurance companies did not want to discuss loss of use or provided 13News with confusing and contradictory information.

An Allstate public relations representative said the company’s decision on whether to cover rental car loss of use charges “depends on a variety of factors, including the policy, facts and circumstances involved with the loss, current laws and what the rental company is claiming.” Asked for more specific details, Allstate representative Jessica Porter said “there are instances where we do” cover loss of use charges for rental cars, although she did not respond when 13News asked her to provide examples of those instances. Four other Allstate employees (two agents and two customer service representatives) all said the company offers no insurance plans that would ever cover loss of use involving rental cars. One of the agents said, “Absolutely no. Under no circumstances does Allstate cover loss of use charges for a rental car.”

Progressive’s public relations department did not answer any of 13News’ questions about its loss of use policies. A customer service manager confirmed Progressive does not cover rental car loss of use charges.

So what can you do to protect yourself from what could be thousands of dollars in unexpected charges for renting a car?

First, call your insurance company to see if your personal auto policy includes loss of use or if you can add that coverage.

“You should know in advance before you go to that [rental car] counter what your personal policy covers and what it does not cover,” Holeman said.

Next, take a closer look at your credit cards. Some include loss of use protection when you use that credit card to pay for a rental car.

Examples of credit cards that offer loss of use protection include Chase’s Sapphire Preferred and United Explorer cards, as well as Capital One’s VISA Signature and Venture X cards. Consumers who pay for their rental car using a USAA credit card are also protected against loss of use fees. It is worth noting that most credit cards that offer loss of use protection are usually premium credit cards that include an annual fee, but that fee can be offset by the credit cards’ additional benefits such as loss of use protection – especially if you get into an accident while renting a vehicle.

And finally, you can always buy the rental car company’s damage protection plan at the rental counter. It covers damage if you get into an accident—including loss of use. But that’s expensive – usually an extra $25 to $40 each day you have the rental car. If you’re already covered through your own insurance or credit card, you can skip that extra cost, according to rental car website Autoslash.com.

“You may be doubly insured, so to pay for a third level of protection on top of that may just be overkill,” Autoslash.com CEO Jonathan Weinberg told 13News. “Knowing about your insurance and credit card status is a great starting point, but if you do find yourself being with loss of use charges, the savvy renter knows you may not have to pay those charges at face value. You can usually negotiate to waive or significantly reduce those fees to avoid the financial pain that comes with a rental car accident.”

The one thing you do NOT want to do: assume you’re covered for loss of use if you actually aren’t.

“Loss of use is definitely something that is not top of mind for consumers. Unfortunately, it’s something renters have to deal with,” said Weinberg.

Check the list of popular insurance companies below to see if your insurer handles rental car loss of use.

YES

• Liberty Mutual — Rental car Loss Of Use charges are covered for Liberty Mutual customers who have an auto policy that includes collision and comprehensive coverage.
• Nationwide —  Rental car Loss of Use charges are covered for Nationwide customers who have an auto policy that includes collision and comprehensive coverage.

SOMETIMES

• American Family — Enterprise and Hertz have preferred provider agreements with AmFam to waive Loss of Use fees for AmFam customers who have comprehensive and collision coverage.
• State Farm — State Farm agents told 13News that customers who want to be insured against Loss of Use charges must purchase a policy that includes collision and comprehensive coverage, as well as an additional "Use of non-owned vehicle" rider to their policy.
• Travelers —  Travelers customers can obtain rental car Loss of Use coverage by purchasing an Extended Transportation Expenses endorsement.
• USAA — USAA auto insurance policies do not cover Loss of Use charges. However, USAA members who reserve a rental car through the USAA Perks program might be covered against Loss of Use, and those who use a USAA credit card to pay for their rental car are covered against Loss of Use fees.

NO

• Allstate — Allstate agents and service reps told 13News that Allstate does not cover Loss of Use charges under any circumstances. An Allstate PR rep said there are instances in which Loss of Use is covered but would not provide examples of those instances. 
• Farmers — A communications director at Farmers Insurance confirmed the company does not cover Loss of Use involving rental cars.
• Geico — Geico insurance agents told 13News that Geico auto policies do not include Loss of Use coverage for rental cars.
• Progressive — Progressive customer service agents told 13News that Progressive offers no policies that include Loss of Use coverage for rental cars.