Do You Need Rental Car Insurance?
It is not necessary to get rental car insurance from your rental car company. If you already own a car, your car insurance policy might extend to rental cars. You could also have coverage through your credit card. If so, you might be able to decline the expensive insurance offered at the counter and save money.
We’ll break down the different aspects of rental car insurance, ways you could save money and how to make an informed decision.
Do I need rental car insurance?
Rental car companies typically offer insurance via a loss damage waiver or collision damage waiver (LDW or CDW). This type of insurance covers you if your rental car is damaged in a collision, stolen or vandalized. With this waiver, the car rental company won’t pursue you for repairs and losses.
However, this kind of rental car insurance is often, though not always, redundant if you have certain coverages on your regular insurance policies. Following the steps below can help you determine whether you’re already covered and if additional rental car insurance is a waste of money for you.
Should I get rental car insurance or use my own insurance policy?
If you’re like most people, you may already be covered under your everyday driver’s policy. Review your personal car insurance policy coverage types and limits to see if it includes any sort of loss damage waiver or collision damage waiver for rental cars.
However, there could be drawbacks to using your own insurance when renting a car. It might be beneficial to use the insurance the rental agency offers. In some cases, your auto insurance may not be applicable to the situation. Here are a few pros and cons of using your own insurance when renting a car.
Pros of using your own insurance for car rental
- Using your insurance is cheaper than rental insurance: If your auto insurance policy covers rental cars, using your existing policy will be cheaper than buying additional insurance for the rental. You can enjoy the peace-of-mind of driving with the right insurance without paying extra for it.
- You know your auto insurance provider and its reputation: If you use your insurance, you have a relationship with the provider and you understand how reliable it is. If you opt-in for rental insurance, you may be working with a new organization you know nothing about.
- Less paperwork required during the rental: When you’re at the rental counter, you usually want to get in and out as soon as possible. Filling out rental car insurance takes extra time and effort. This part of the rental process can be bypassed if you already have an insurance policy that covers rentals.
Cons of using your own insurance for car rental
- Personal auto insurance may be inadequate: Your insurance may not provide the coverage you’ll need in an accident. If you only have minimum liability insurance, you may need more coverage to cover a rental car.
- Personal auto insurance may be prohibited: Many auto insurance policies are limited to the United States. If you are traveling abroad, your auto insurance may not cover claims that occur outside of the county.
- Claims could lead to issues: If you choose your insurance policy rather than buying rental insurance and you need to file a claim, there could be issues with approving the claim for a car you don’t own. Check the details in your insurance policy declaration page to see if issues could arise.
Check your health insurance policy
If you have adequate health insurance, your policy would typically pay the medical costs for you and your passengers if you’re hurt in a rental car crash. This is especially true if you also have medical payments and/or personal injury protection through your regular car insurance.
If this is not something your health insurance policy will cover, personal accident insurance covers medical costs for you and your passengers if you’re hurt in a rental car crash.
Check your homeowners insurance or renters insurance policy
Your homeowners insurance or renters insurance policy should cover your belongings wherever you take them, even if they’re stolen from a rental car. That means it’s usually safe to decline the rental company’s personal effects coverage, which would pay for the loss of any personal items that are damaged in a rental car or stolen from a rental car.
Note the limits of your personal coverage, which may require extra riders for certain valuables such as expensive jewelry.
Check your travel insurance
If you’ve purchased travel insurance for your trip, see whether car rental collision coverage is included. This kind of coverage is typically similar to what the rental company’s loss damage waiver would take care of, sometimes at a lower cost.
Check whether the coverage is primary or secondary, however. Primary means you won’t have to involve your own car insurance company in the event of a problem. Secondary means that your insurance company is on the hook before the travel insurance coverage kicks in.
Check your credit card benefits
Some level of rental car insurance is a benefit offered by many credit card companies as long as you pay for the rental with your card. If you lost the guide to card benefits your company sent with the card, call the company or go online to verify these benefits.
Specific car rental insurance benefits will vary by company and card. You may only be covered for a certain period of time, such as for 15 or 30 consecutive days. The amount of collision damage will be capped at different amounts, such as $25,000 or $50,000.
Theft and towing costs are commonly covered, but personal property and medical benefits are less common. Some companies will cover loss of use charges whereas others will not. It’s common for card companies to exclude certain vehicles, such as expensive luxury cars or full-size vans and costs incurred in certain countries that are higher-risk for drivers.
Most credit card benefits provide only secondary rental car insurance coverage. Like some kinds of travel insurance coverage, these benefits will only fill in the gaps for costs not covered by your personal car insurance. You’ll also usually have to decline the rental car company’s coverage to take advantage of any of these benefits.
What are the coverages available when buying direct rental car insurance?
Car rental agencies have their own process for selling insurance when renting cars, so there is no list of coverages that will apply across the board. However, most rental agencies will have coverages you can purchase along with your rental.
Here is a list of coverages commonly offered by rental agencies, according to the Insurance Information Institute. The coverages are either sold separately or packaged under a single rental insurance policy:
- Loss/collision damage waiver: The loss damage waiver, or LDW, is sometimes called the collision damage waiver, or CDW. The LDW lets you off the hook for costs if your rental car is stolen, vandalized or damaged in a crash. This may include loss of use charges, which rental car companies charge to make up for lost profits when they must repair a vehicle.
- Liability: Sometimes called supplemental liability insurance, or SLI, rental liability insurance covers you if you damage other vehicles or property while driving the rental car. It can also pay medical expenses for others who are hurt in a crash you caused.
- Personal accident insurance: Personal accident insurance, or PAI, covers medical costs for you and your passengers if you’re hurt in a rental car crash.
- Personal effects coverage: Personal effects coverage, or PEC, covers you if any personal items are stolen from or damaged in your rental car.
If you have an auto insurance policy that covers rental cars, the policy may only include liability coverage. Some drivers may choose to buy extra coverage from the rental agency even if they have some protection under their insurance policy. Buying extra coverage for a rental limits your financial risk in the event of an accident.
Standalone policies for rental cars
If you do not carry rental car insurance as a benefit on your other insurance policies or credit cards and you want to skip the policy offered at the rental desk, you can purchase a standalone policy. You may also want a standalone policy for rental car insurance coverage if your personal car insurance coverage limits are low.
If you rent cars often and want your own standalone policy, here are a few of your coverage provider options.
- Allianz: Allianz is a popular provider of travel insurance. The company offers a policy called Rental Car Damage Protector that provides up to $40,000 in coverage with 24-hour emergency assistance for $9 per day with almost-worldwide coverage. This policy includes coverage of up to $1,000 for lost or damaged baggage, a $40,000 collision damage waiver to cover your rental car if it’s stolen or damaged in an accident or if it’s parked.
- Insure My Rental Car: Insure My Rental Car offers annual and daily rental insurance policies with up to $100,000 collision damage and loss damage waiver with zero deductible for damage caused to the rental car. Policies start at $6 per day. Insure My Rental Car coverage begins automatically. In the event of an accident, there’s no need to submit a claim to your personal car insurance company. This provider does not insure in Iowa, Massachusetts, New York, North Carolina, North Dakota, Rhode Island, South Carolina, Virginia and Washington.
- Bonzah: Bonzah offers comprehensive damage waivers up to $35,000 as low as $7.99 per day to cover damage from a crash, theft or vandalism. It also covers damages caused by bad weather such as windstorm, fire, hail and flooding.
- Sure: Sure offers $100,000 in rental car insurance coverage in the event of an accident or theft as well as protection against lost keys, flat tires and damage from driving with the wrong fuel. It will also pay towing expenses.
The rental car company may insist that you pay a damage claim upfront if you opt for insurance other than what they offer. Your insurance would be used to reimburse this claim, which is typically charged to your credit card. If you use a debit card to secure your rental, you may have to either purchase the offered insurance policy or provide a credit card in case of damages.
What does rental car insurance cost?
Rental car insurance costs vary by company and coverage, but it isn’t cheap. You may pay $10 to $30 a day for a loss damage waiver alone. If you opt for supplemental liability, add another $10 or so. Personal accident insurance and personal effects coverage could add another $5 each to your tab.
Add everything together, and you could easily pay as much as $30 a day to be fully covered by rental car insurance. Considering that you can often rent an economy car for not much more than that—and sometimes less, if you get a good deal—that kind of daily tab for rental car insurance is a tough pill to swallow.
When should you get rental car insurance?
Though we wouldn’t recommend purchasing rental car insurance when you’re already covered, there are some common situations where this pricey add-on might make sense. Here are a few:
- You don’t have car insurance, or what you have is bare bones: If you don’t have car insurance, you have very high deductibles, or you don’t have comprehensive and collision, you’ll probably want to think about at least opting for the rental company’s loss damage waiver. If you have no car insurance at all, you’ll also need to spring for supplemental liability.
- You’re traveling for business: If you’re mixing business and pleasure and your company won’t cover rental car insurance, talk to your own car insurance agent about whether your policy will protect you. If you’re renting a car primarily for business, your personal car insurance may not cover you at all.
- You’re driving a rental car abroad: Chances are your car insurance won’t cover you most places outside the U.S. While your credit card may still offer some protection, make sure the country where you’re traveling isn’t specifically excluded from benefits. You’ll often be out of luck in many popular destinations, including Italy, Ireland, and Australia.
- You’re worried about a rental car incident affecting your personal insurance rates: If you file a claim, your rates could go up. The same holds true if your claim involves a rental car, but in this case, you don’t need to worry if you buy the rental car insurance.
- You want peace of mind at any cost: For some, the knowledge that they don’t need to worry may be enough to sign on the dotted line for rental car insurance regardless of the coverage they may already have. If worrying about your rental car will otherwise cast a cloud over your trip, by all means, get rental car insurance coverage.
Should I get rental car insurance if I am on a budget?
When you’re on a budget, deciding on rental insurance is a tricky question. Rental insurance is expensive, with some rental agencies charging $30 or more daily, and buying extra coverage from the rental agency can be a big expense for those trying to save money.
Due to the high cost of rental insurance, some people may decide to go without, but this route also comes with pitfalls. If you get into an accident in a rental car without proper insurance, then you could be on the hook for a lot of money you might not have in the bank.
When deciding on whether or not rental insurance is worth it on a budget, think of what would happen after an accident. If you can afford to pay the expenses, rental insurance can be bypassed. If not, it’s a good idea to pay for the extra insurance.