I discovered something a little scary about Australians during my last trip to the US in August. It illustrates some of the vast differences between our cultures.
It concerns the subject of insurance coverage for driving a car in the US. What I found out is that Australians are not aware that they are not covered by insurance when they drive in the US. What is worse is that they do not even know to ask about it. So they drive around blissfully unaware of what could happen should they be involved in an accident. Here is why...
In Australia, all cars are insured for medical liability by the state. When you pay your annual registration fee for your car, you also pay an insurance premium (called "rego" here), which provides coverage for any injuries substained to anyone injured as a result of operation of that vehicle. It is a no-fault system. If you get hurt by a car, you submit a claim to the state, and they cover the expenses.
This "rego" premium does not provide comprehensive coverage for property or your car. If you want to protect yourself against being sued for property damage, or against theft and damage to your car, you can buy private insurance coverage for that. They are separate from the medical liability.
As for medical coverage for your own injuries, you are covered by your existing medical coverage. The fact that you were injured in your own car does not matter. If you need medical care, then your medical insurance should cover you. All Australian citizens are covered by the national health care system, so there is a minimal level or coverage on your head.
Here is the problem. Growing up and living in such an environment where there is no need to think about any medical liability for yourself or others, Australians can not conceive of any first-world country not offering such protection. But as we know, in the US, there is no such thing.
This all came up when I started investigating my insurance coverage for when I go home to the US. I have an account with a US insurance company. I pay them an annual premium and they provide me with liability coverage when I rent a car in the US.
My contract with my visa sponsor here in Australia requires me to have private medical insurance coverage when I am outside of Australia. This is because my Australian medical insurance company will not cover me overseas. So I end up buying travel insurance that has a decent medical element to it. It is simply the easiest and cheapest way to get the coverage I need.
Travel insurance also covers things other than medical care. They cover trip cancellations, lost or stolen luggage, etc, etc. Their policy also covers personal liability, up to $2 million or so. This sounds like a duplication of coverage to me. If my travel insurance covers my liabilities, and my medical care, why do I also need to pay my US insurance company for additional auto insurance?
These matters were on my mind when I went shopping for travel insurance for trip. I asked the travel agent who was selling a policy if this provides me total coverage in the event I cause an accident while driving a rental car in the US. She looked at me with a blank stare for a while, and answered "Of course it does. Why wouldn't it?"
I pointed out to her the fine print on the policy that stated "We will not provide coverage for any claims that arise from the operation of any motorized vehicle."
"Wouldn't a rental car be considered a 'motorized vehicle'?", I asked.
She read the contract again. A puzzled look came over her. She said she didn't know and suggested that I call the company that issues the policy, AIG in Sydney, and ask them. So I did. AIG transferred me to a claims specialist, to whom I posed the same question I has asked the travel agent.
The exact same thing happened with the claims specialist. She too was surprised to read that exception. But she told me not to worry about it.
"Are you kidding?!? That is a huge loophole for you. I can't purchase such a policy with such holes in it."
I called my local RAC office. The RAC is the Aussie equivalent to AAA in the US. I get my comprehensive insurance through RAC. Like the AAA, the RAC also specializes in travel for their members. I asked them about the coverage for any accidents caused by me driving a rental car. Like AIG, they "thought" it was covered, but as I pointed out, it was not. I asked them if they sold any overseas automobile insurance that I can add to my existing policy. Nope. They do not. They had not considered it.
I eventually ended up at the office of an insurance broker here in town. I always end up with him. He seems to be able to get me the best deals, no matter how hard I shop around for alternatives. I should stop wasting my time and simply go straight to him every time. I brought up my concerns to him about my liability for any claims resulting from an automobile accident in the US.
Like the claims agent in Sydney, he too was shocked to see this loophole embedded in the fine print. He had no idea that the travel insurance policy he was selling would not protect people from claims in the US if they drive a car. The reason he didn't know was because like other Australians, he simply can not conceive of a state that will allow a car on a road that doesn't have a minimum amount of coverage from somewhere.
True, in California, a minimum level of insurance is required by law. But that does not mean that every car on the road has it. Some owners cancel their policies right after satisfying the DMV that they have coverage to get their registration. In fact there is a whole market for insurance companies that sell 24-hour policies that last just long enough to register the car. There is an underground market for fake proof-of-insurance documents if you can't be bothered to get the real thing.
Now getting back to Australians. The average Aussie has no idea about this stuff. They have been protected from such ugly things, so much so that they simply don't know what they don't know. They fly to the US, rent a car and drive to Disneyland. If they cause an accident, they find that they are not covered. Of course they could flee back to Australia. But that doesn't make the problem go away. I suppose it is possible for the damage claims to be pursued against them in Australia. But more realistically, what if the Australian wants or needs to come back to the US? What if they need to come over once in a while for their job?
So what to do? I asked the insurance broker this question. He said that I had no choice. I had to buy a separate policy from a US insurance company to cover this liability. He did not sell any such product. Nor did he even know any company that did.
I got on the web and started digging around. I found a handful of companies that offer specialized world-wide travel insurance that does offer this coverage, but they were frightfully expensive.
So I ended up back at my US insurance company. I paid my annual premium for their minimal level of protection when driving a rental car. But I'm lucky. Being a US citizen with a US address, I can do this. The average Aussie on vacation does not have this luxury.
I asked around the office what they do when they travel to the US. They didn't know. Either they don't rent a car, or if they must, then it is strictly for business, and is therefore covered under IBM's insurance. In a nutshell, they are all too afraid of the US to drive there on personal vacation.
Now there is an option the Aussies can exercise. The car rental companies offer insurance coverage when you rent the car. But it is a rip-off. It is expensive, and the insurance you buy is designed to protect the car-rental company, not YOU. Being pressured into buying a policy from a car-rental agent who uses scare tactics is not a good way to made insurance decisions. Every consumer review I have ever read has claimed that the coverage offered is joke, is redundant if you already own an insured car at home (in the US), it is biased, and are overpriced.
I can't help but wonder how many Aussies decline the optional insurance offered by the rental company and drive off, oblivious to the liability they have.
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