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I don't have any current (auto or home or renter's) insurance and need to rent a car for one week in Minnesota. The minimum, after tax, cost I can find is $280, but this includes no insurance (I even have to specifically sign that I am declining insurance). I believe that my having no insurance here is still legal in Minnesota because the car rental company has somewhere agreed to cover me up to state liability minimum limits.

So, suppose I hit somebody (and am at fault) who therefore needs $10k in medical treatment. My impression is that the car rental company (or a different company that insures them, but let me just call all of this "the company") will pay for this and then demand the $10k from me.

So, I am getting legal insurance but taking all the responsibility. It's like having an infinite-deductible policy (with deductible applying to "liability" also, instead of just "collision").

All of the above is for a rental car, but is there a way to operate a vehicle I own like this too?

Such a policy would be the cheapest, so a super-safe and super-defensive driver (who could therefore never be at fault in an accident) would want this policy. It seems theoretically possible for an owner because it already exists for a renter. Do any insurance companies offer owner policies like this? Would it be legal if they did?

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  • Is my premise that $10k would be paid from the company to any victim wrong (suppose that I am bankrupt except for the $280)? It seems like it should then have been illegal for the company to let me drive away in the first place. Am I an "uninsured motorist" and therefore committing a misdemeanor if I take this rental?
    – bobuhito
    Oct 25, 2021 at 22:24
  • Note that your statement about super-safe and super-defensive drivers doesn't imply that they "could therefore never be at fault in an accident". Even the best drivers in the world cause accidents. All humans make mistakes. And, an uninsured driver may hit you too.
    – TTT
    Oct 27, 2021 at 17:37
  • @TTT Obviously I simplified to keep the question short, but my point is that safe drivers, on average, would come out ahead with self-insurance (instead of paying insurance rates designed for average drivers).
    – bobuhito
    Oct 27, 2021 at 21:57

4 Answers 4

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Former rental car employee - your head is in the right place but you're missing one thing. Rental car companies (at least the big green one I worked for years ago) don't sell insurance, they sell a damage waiver. All it's doing is waiving their right to go after you in the event of a collision to cover the costs of their vehicle they loaned you.

Why this practice makes sense is let's say they sell X amount of damage waivers per day at $25/day per rental. The average person renting a car isn't going to damage one, so that $25/day is pure profit in 99% of all scenarios. In the event of an accident in the other 1% of scenarios, they simply pay for it and move on. This is of course an insane oversimplification of the process but it's essentially how that works in a nutshell. The process may have changed or there may be new rental damage waivers that do cover personal injury, but I've been out of that scene for awhile so I'm not sure.

So if you're planning on signing up for the rental damage waiver and hoping it covers anything beyond the car the company loaned you - you may be in for a hard lesson. You may have better luck checking what credit card you use to rent, most of the higher end cards offer rental "insurance" in some form or another, again be sure to read the fine print there because no company is going to assume that kind of risk for free.

EDIT:

I'd like to just offer up an edit here as I was replying to user662852 and felt this worthy of sharing with everyone. I dug deeper into the official "coverages" through the big green rental agency I worked for, the wording of these may be newer but the concepts are roughly the same from what I remember. The top level Damage Waiver (DW, or CDW) is as I mentioned above, just the waiver of their rights to come after you if you damage the car.

The second tier is PAI/PEC, Personal Accident Insurance and Personal Effects Coverage which is, "The PEC contained in the policy insures the personal effects of the renter, additional drivers, or any members of the renter's immediate family who permanently resides in the renter's household and who is traveling with the renter against risks of loss or damage." So it covers you and your occupants against injury claims.

The bottom tier is kind of vague but is SLP, Supplemental Liability Protection which states, "If the renter accepts SLP, Enterprise provides third party liability protection up to the applicable minimum financial responsibility limit and Zurich American Insurance Company provides excess third party liability insurance coverage from the applicable minimum financial responsibility limit to $300,000." This I believe is supposed to act as a supplement to your existing insurance policy in the event your claim were to exceed your policy limits. I based my point off this, "Enterprise 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 SLP."

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  • You're saying that the company won't pay for the other driver's $10k in my example whether I buy the option or not. I can't believe that because Minnesota law doesn't allow that. I believe the company will pay even if I don't buy the option (the point of my question is that they then come after me if I don't buy it).
    – bobuhito
    Oct 25, 2021 at 19:01
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    It's because it's not insurance, that's the difference. You're buying a damage waiver, which is only waiving the car rental agency from the right to come after you in the event of an accident, that's it. The only "insurance" in play in your scenario is whatever personal policy you have outside of the rental agreement and the persons policy who you hit. To be blunt and extremely broad, the vehicle you were loaned is the only thing that the rental company cares about.
    – MikeWRX
    Oct 25, 2021 at 19:17
  • So, are you saying it would be illegal for me to do the Minnesota rental in the first paragraph of my question (and illegal even if I do buy the damage waiver!)? Shouldn't the car rental place then tell me that and prevent me from driving away?
    – bobuhito
    Oct 25, 2021 at 22:08
  • I understand SLI (Supplemental Liability Insurance) and CDW (Collision Damage Waiver) are different line-item coverages the rental company offers the renter. Does your answer apply to both? It seems to focus on the CDW product. Visa "Signature" and above (and some Amex cards; I assume mastercard but unsure of the details) include a CDW coverage but do not include SLI.
    – user662852
    Oct 26, 2021 at 13:36
  • My read on your quoted 'premium policy' from solely your provided sentence is NOT that it covers against injury claims, just claims against damage against 'personal effects' [ie: things you are carrying on you from time to time, like a laptop or watch]: "The PEC contained in the policy insures the personal effects of the renter, additional drivers, or any members of the renter's immediate family who permanently resides in the renter's household and who is traveling with the renter against risks of loss or damage." Be careful to not read coverage into a policy which may not exist. Oct 26, 2021 at 17:43
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"Rental car companies must provide a minimum level of liability insurance..." - Nerdwallet

"Damage you do to others: At the [rental car] counter: Supplemental liability protection will pay for damage you do to others’ vehicles or property. Typical limits range from $300,000 to $1 million." - Nerdwallet

Credit card benefits typically do not cover liability - Nerdwallet

  • "What if I don’t have personal auto insurance? Generally, you get an even greater benefit from your card: Secondary coverage becomes primary for collision."
  • "What isn't covered? Typically not covered are liability and injury concerns, such as damage to property other than the rental car, people you hurt and related lawsuits."
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Kinda, maybe.

You can increase your deductible to quite high, and that will significantly reduce the costs required to cover damage to your vehicle.

But there will still be the costs needed to cover events when you are at fault and need to pay to cover the damage to the property and/or person of others. The minimum coverage required by law will, of course, depend on the local law (usually/always the State, in US). These laws don't care if you could pay for the damages out of pocket.

Theoretically, a company could keep your money in escrow to cover expenses for such an event, and add an umbrella policy to cover expenses beyond that (umbrella policies are relatively cheep). This would require a massive upfront payment to set up the escrow account though. On the plus side, when you closed the account, you could reclaim the money in escrow. I would suspect the fees charged to manage such an escrow account would likely not be much lower than just getting a standard policy.

But, as MikeWRX went over, you appear to have a large misunderstanding on what you were signing for your rental.

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  • Yes, I might have a large misunderstanding of my rental example, so I'll try to understand that with my comments for MikeWRX's answer. Aside from that, yes, an escrow insurance provider would be great...but I'm not aware of any in Minnesota. Is there a real example provider like this in Minnesota? I still have my doubts about whether Minnesota law allows that.
    – bobuhito
    Oct 25, 2021 at 22:16
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I'll let others address whether or not your interpretation of the rental scenario is correct, but I'll address the "...is there a way to operate a vehicle I own like this too?" part.

Yes, it's called Self-Insurance

You can put aside a portion of your own money. Essentially, you're saying:

Here's $200,000 in an escrow account that I won't spend. I'm going to leave it in that account so that I can use it to pay for any losses for which I am responsible. Thus, I don't need to buy traditional auto insurance.

The details vary by state in the US.

See also: https://www.caranddriver.com/car-insurance/a36421647/self-insurance-car/

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  • I was aware of self-insurance, but it is not legally allowed in Minnesota.
    – bobuhito
    Oct 25, 2021 at 22:09
  • It is allowed in Minnesota, but you probably won't meet the minimum requirements. mn.gov/commerce/industries/insurance/licensing/self-insurance
    – Doug Deden
    Oct 26, 2021 at 13:53
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    Interesting. I guess I don't see Minnesota in any "self-insurance state lists" because Minnesotans need 25 vehicles and to pay a $2,500 fee (plus $1,500 every 3 years). Car rental companies in Minnesota, however, might be doing this. To answer my original question theoretically, it seems that brokerages (since they can verify assets to exceed a high liability threshold in real-time like an escrow), could thereby offer my "Cheapest Auto Insurance" method as a service to customers (effectively grouping hundreds of wealthy self-insurers into one fee).
    – bobuhito
    Oct 26, 2021 at 14:37

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