Should you buy extra rental car insurance at the counter?
Last updated: July 2023
For some drivers, rental car insurance is a necessity. For others, it's a redundant expense. But, how do you know which category you're in?
Before you rent a car, it's worth reviewing the coverage on your personal car insurance policy. In some cases, the coverage you have on your own car extends to a rental car. In other words, buying rental car insurance coverage may duplicate what you already pay for.
The extra cost of the rental company's coverage might make sense in a few cases, however. For that reason, it's important to understand what your personal auto insurance covers, and what the rental agency is offering.
Does my car insurance cover rental cars?
If you have a personal car insurance policy, it includes liability coverage and any additional coverage you've opted for, such as comprehensive or collision. If you drive a rental car for personal use, you may have coverage under your personal car insurance policy. The coverage limits and deductibles on your personal policy also apply to your use of a rental car.
- Liability coverage helps pay for another person's medical bills or damage to another person's property if you cause an accident in your vehicle (or your rental vehicle). In some states, damage to the rental car must be paid under property damage liability coverage.
- Comprehensive coverage helps pay to repair your vehicle (or your rental car) if it's damaged by a covered peril, such as theft, wind, fire or natural disasters. Your comprehensive coverage's deductible will apply.
- Collision coverage helps pay to repair your vehicle (or your rental car) if it's damaged when you collide with another vehicle or object, such as a fence or a tree. Your collision coverage's deductible will apply.
Does My Credit Card Have Rental Car Coverage?
In addition to your auto insurance, certain credit cards offer extra insurance if you pay for a car rental using that card, according to the Insurance Information Institute (III). If you have extra rental car insurance through a credit-card issuer, call the toll-free number on the back of your card and have them explain your options in detail before you reserve your car.
For example, if your credit card provides collision coverage for rental cars, then you might decide not to purchase that coverage from the car rental agency. The card issuer's insurance is typically "secondary," according to the III. That means it may pay your deductible and expenses that exceed what your primary insurance company will pay.
Forbes says some credit card providers may exclude coverage for certain types of rental vehicles, such as:
- Luxury vehicles
Be sure to check your benefits before you rent.
When Is Rental Car Insurance Coverage A Good Idea?
If you don't currently have insurance, you'll need to at least buy liability coverage from the rental company before you hit the road. That's because liability coverage for all drivers is required by law in most states.
If any of the following scenarios apply, the extra protection provided by rental insurance is worth considering:
- Your current policy doesn't have comprehensive and collision coverage
- You're only insured under a commercial car insurance policy
- You don't want to risk paying a high deductible
And if you're driving abroad (apart from Canada), your current car insurance probably won't cover you. Check your policy to find out.
What Are The Different Rental Car Insurance Options?
Rental car agencies typically break out extra rental car insurance offerings into four sections, according to the III:
- Liability coverage
- Collision/Loss Damage Waiver
- Personal effects coverage
- Personal accident coverage
Liability coverage is intended to help protect you if you injure someone or damage their property while driving. If you have sufficient liability coverage through your own auto insurance, you may not need to buy extra rental car liability insurance coverage from the agency. Your insurance provider can help you review your coverage, so you can set the liability limit that's right for you.
Collision/Loss Damage Waiver
A collision/loss damage waiver (also known as an LDW or CDW) isn't technically insurance. If you damage the rental car, this waiver may help cover the cost of repairing it. The waiver typically does not cover damage from speeding or driving on unpaved roads.
A collision damage waiver may duplicate your existing coverage if you have collision and comprehensive coverage on your own car. However, if you've dropped collision or comprehensive coverage from your policy, and you don't purchase the waiver, you would likely have to pay out of pocket for damage you cause to the rental car.
Additionally, a rental agency could charge you for "loss of use" of the car (lost rental income) while the car is in the shop being repaired. Your own auto policy typically won't reimburse you for that. Be sure to read your car rental agreement carefully to clarify what kinds of charges you could incur if you were to damage the vehicle.
Personal Effects Coverage
Personal effects coverage may help cover your personal belongings, such as your laptop or clothing, if they're stolen from the rental car. If you have renters or homeowners insurance, the personal property coverage on that policy typically helps cover your personal items through what's known as "off-premises coverage."
Off-premise items are usually only covered up to a certain percentage of your personal property coverage. The deductible on your homeowners or renters insurance will apply. Check with your insurance provider about the limits of your coverage.
Personal Accident Insurance
Personal accident insurance helps pay your and your passengers' medical bills, if you're injured in a rental car accident. The III says if you have health insurance, medical payments coverage or personal injury protection on your car insurance policy, you may already have coverage comparable to what the rental company offers.
Medical payments coverage and personal injury protection (not available in all states) may help pay for medical bills due to a covered car accident.
Coverage to Check Before You Rent a Car
Before you rent a car, take a few minutes to find out whether you have coverage through existing channels, such as your credit card company, health insurance plan or renters or homeowners policy. And be sure to check your personal car insurance coverage. Buying extra rental car insurance may not make financial sense if your auto policy already provides the coverage you need.