Updated: September 2016
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 may duplicate the coverage you already pay for.
The rental company's extra coverage might make sense in a few cases, however. For that reason, it's important to understand what your car insurance covers, and what the rental agency is offering.
Your personal auto insurance policy includes liability coverage and any additional coverages you've opted for, such as comprehensive or collision. Those coverages may extend to your rental car.
- Liability coverage may help 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).
- Comprehensive coverage may help 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 may help 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.
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. The card issuer's insurance is typically "secondary," meaning that it may pay your deductible and expenses that exceed what your primary insurance company will pay, according to the III. Be sure to check before you rent.
Rental car agencies typically break out their extra insurance offerings into four sections, according to the III:
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 coverage from the rental agency.
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 excludes coverage for damage caused by speeding or driving on unpaved roads.
An LDW 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 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 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-premises 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 agent about the limits of your coverage.
Personal accident insurance may help 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.
If you're not sure whether buying rental car insurance makes sense for you, it can help to first understand what coverages you already have. Talking to a local agent about your car insurance policy before you rent a vehicle may help you make an informed decision when you're at the rental counter.