Car Rental Insurance: Do You Need It?

Car Rental Insurance: Do You Need It?

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Whether you are on a business trip or vacation, picking up your rental car will always include this question: “Would you like to purchase optional car rental insurance?”

It can be difficult to determine if you need this extra coverage from your rental car company, especially if you haven’t thought about it before you were ready to pick up your rental car. Understanding the specifics of how car rental insurance works can help you decide if this additional coverage is right for you.

Here’s what you need to know about car rental insurance:

What is car rental insurance?

When you rent a car, you have the option of purchasing car rental insurance to cover any damages or injuries resulting from an accident that you cause while driving. You can choose from different types of coverage. Car rental companies are legally required to offer a minimum state-mandated liability insurance as part of their rental agreement.

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Types of car rental coverage

Although car rental insurance seems like a single policy that you can either subscribe to or opt out of, you actually have four different types of car rental coverage to choose from:

  • Accident damage waiver: Also known as a loss damage waiver, this coverage is not technical insurance. Alternatively, when you purchase this waiver, the rental car company will not hold you financially liable for any vehicle damage, theft or vandalism.
  • Liability Coverage: This covers you if you cause injury to someone or damage to someone else’s property while driving the rental car. Your car rental agreement will automatically include the minimum state-mandated liability coverage.
  • Personal Accident Insurance: This insurance will cover the medical costs for you and your passengers if you have an accident in a rental car.
  • Personal baggage coverage: If someone steals your personal belongings from the rental car, this coverage will compensate you for the loss.

Car rental insurance vs. your own car insurance

Even if you own a car and already have a car insurance policy, you may assume that you need to get car rental insurance. But your car insurance policy generally covers you when you drive a rental car for personal reasons. Just know that many policies do not cover the rental cars you drive to work.

It is important that you understand the differences between the insurance you choose at the rental car office and your insurance policy. Specifically, your rental car coverage and your auto insurance coverage may differ in terms of damage or theft of the rental car, liability for damages or injuries to others, your own injuries, or items stolen from your rental.

If you need any of these types of coverage from your rental car company, you will have to sign up for each one. Other than minimum state-mandated liability coverage, car rental insurance coverage options are not automatic.

Here is a closer look at the differences between rental car insurance and personal auto insurance:

coverage Car rental insurance Personal car insurance
Damage to the rental car or theft of the rental car The Collision Damage Waiver will waive your financial liability if the rental vehicle is damaged or stolen. If you have comprehensive coverage through your car insurance, your rental car will be covered, minus your deductible.
Liability for injuries to others or damage to property of others The rental car company must offer the minimum state-mandated liability coverage. You can also purchase supplemental liability protection for more coverage. Liability coverage protects you in these cases, provided you are using the rental car for personal reasons and you are renting within the United States or Canada.
Your personal injuries Personal accident insurance will pay for medical costs for you or your passengers in the event of an accident. If you carry Personal Injury Protection (PIP) or Medical Payments coverage with your car insurance, it will generally cover the medical costs for you and your passengers in the event of an accident.
Items stolen from the rental car Car rental companies offer personal baggage coverage (up to a maximum) that will compensate you if some items are lost if the vehicle is broken into or stolen. Auto insurance does not cover items stolen from a rental car. But if you have renters or homeowners insurance, your personal property coverage will generally cover stolen items, even if you’re traveling (up to a certain limit).

When does it make sense to get rental car insurance

Choosing car rental insurance may or may not be the right move for you. It depends on a number of circumstances, including where you are, the coverage you already have, your deductible, and the length of time you’ll need the rental car.

Here are some common scenarios in which you may want to opt for car rental insurance:

  • If you do not have car insurance, You’ll probably want to at least choose to waive collision damage and liability coverage, or else you’ll be in trouble for damage to your rental car or injuries to others in an accident.
  • If you are renting a car outside the United States or Canada, You may want to purchase a collision damage waiver and liability coverage, as your car insurance likely won’t cover you in a car rented in another country.
  • If you have a large discount on your personal car insurance policy, You can choose car rental insurance, as this coverage is usually low or no.
  • If you do not have health insurance or medical payment coverage, It may be a good idea to purchase personal accident insurance. This helps ensure that your medical costs are covered in the event of an accident with the rental car.
  • If you do not have homeowners or renters insurance, You may wish to add coverage for personal belongings through your car rental company to ensure that your personal belongings are secured against theft.
  • If you are concerned about a high car insurance premium, You may prefer to purchase rental car insurance, as filing a claim with your insurance company may increase the price.

When it doesn’t make sense to get car rental insurance

In some scenarios, you may not want to purchase car rental insurance. By opting out of your rental car company’s optional insurance add-ons, you may be able to save money while still maintaining the insurance coverage you need.

Some common scenarios when it doesn’t make sense to get car rental insurance include:

  • If you have strong car insurance, Then your personal insurance coverage may already be enough.
  • If you book the rental car and pay for it with a credit card, You may already have collision coverage through a credit card.
  • If you do not take any valuables with you, There is probably no need to cover personal effects. Likewise, if you take anything of value with you – such as a laptop – but have a renters or homeowners insurance policy, you may not need to cover personal effects.

Credit cards with car rental coverage

Many major credit cards offer some collision coverage for rental cars if you book and pay for the rental car with that credit card and book in the cardholder’s name.

This type of credit card coverage may replace the need for a collision damage waiver from the rental car company. However, this type of coverage is often “secondary”, meaning that payment will only be made after the personal car insurance has begun. This means that credit card coverage may be able to reimburse you for the deductible, but it cannot protect you from a premium increase if your auto insurance company decides to raise your rate after a claim.

Some travel credit cards offer basic rental car coverage, which means the coverage will pay out first, and you don’t have to file a claim through personal car insurance. The specific coverage and limitations of car rental insurance vary from credit card to credit card. It’s important to know what your card covers and how much you’ll pay before you decline car rental insurance. You can contact your card issuer for details.

Some credit cards with this feature include:

  • Any American Express card enrolled in the credit card company’s Premium Car Rental Protection program
  • Capital One Venture X Card
  • Chase Sapphire Preferred® Credit Card
  • Chase UnitedSM Explorer Card

How much is car rental insurance?

Here’s what you can expect to pay roughly for each of the four types of car rental insurance coverage:

  • Accident damage waiver: $10 to $20 a day
  • Car rental liability coverage: $7 to $14 per day
  • Personal Accident Insurance: $1 to $5 a day
  • Personal baggage insurance: $2 to $5 a day

Good to know: These costs are added to the daily rental fee. This means that choosing all four types of rental car insurance for a seven-day rental can add up to $308 to your total rental costs.

How to get a rental car through an insurance claim after an accident

If your car was damaged in an accident and you need to drive a rental car while your car is being repaired, follow these steps to get a rental car through your insurance claim:

  1. Determine if you have rent reimbursement coverage. If you are at fault in the accident, you will need to use your car insurance for rental car coverage. Unless you have chosen to add car rental reimbursement coverage, your insurance will not automatically pay for your rental. Check your insurance policy to see if you are covered.
  2. Contact the insurance company about payment. Whether you were at fault and made a claim against your insurance, or the other driver was at fault and you were making a claim against them, you will need to talk to the appropriate insurance provider about how the payment will be handled. The insurance company will likely reimburse you after you pay out of pocket, but it may also pay the car rental agency directly.
  3. Review your coverage limit if you use your own insurance. Most insurance companies put a cap on your rental car fee or the number of days your rental will cover.
  4. Use a car rental company that is approved by the insurance company. If your insurance company asks you to use a particular car rental company, be sure to follow the directions in order to get reimbursed.
  5. Choose a rental car of the same type and general value as your own car. If you are allowed to select a vehicle, choose a vehicle similar to yours. The cost of your rental car will likely be approved in this case.
  6. Send all transaction records to the insurance company. Submitting these papers promptly will help ensure timely payment.
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About the author

Emily Jay Birkin

Emily Jay Birkin is a credible body regarding student loans and personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

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