To get rental insurance or not to get rental insurance? 

Travelers looking to borrow wheels are divided on the answer. Statistics gathered by the National Association of Insurance Commissioners says that only about 20% of all consumers actually purchase rental insurance. The 80% who don't may not want the added costs, or may believe that their car insurance or credit card will cover any damages.

Before you make your decision, here are the basics of rental car insurance.

Insurance Coverage Types

There are three types of auto insurance that you should be aware of prior to renting a car:

1. Collision/Damage Waiver (CDW)

A CDW is not a traditional insurance policy, even though the waiver provides you with protection in the case of an accident. The waiver states that if something happens to the rental car, the rental car company will not make a claim against you. Keep in mind that there are some exceptions, including if you were driving under the influence at the time of the incident. Cost of this waiver varies by company.

2. Liability Insurance

Liability car insurance protects you from paying out of pocket expenses if you damage another person's vehicle or property. The coverage is limited to a specified amount that also varies by rental company.

3. Personal Effects Insurance

Personal effects insurance ensures that if your personal belongings are stolen from the vehicle, you will be reimbursed the cost of the items.

Questions to Ask Yourself

Before agreeing to supplemental rental insurance, there are a few factors to assess:

What Does Your Auto Insurance Cover?

Checking with your personal insurance provider about what your policy covers is essential. Some providers don't cover the "loss of use" charges that appear on the collision damage waiver.  If the rental car is involved in an accident, the loss of use charge is the amount of money that the rental agency states they will lose while the car is being repaired.

It is also important to note that if you are involved in an accident while driving a rental car, your personal insurance coverage premium may go up in the future. This is why some renters choose to purchase the CDW.

More: Compare car insurance

What Insurance Does Your Credit Card Provide?

The major credit card providers (Visa, MasterCard, Discover, and American Express) typically provide some form of protection for their cardholders. Don't think of this as your primary means of insurance. Most card companies offer secondary insurance that is only paid out if your primary insurance provider has paid certain expenses to the rental company.

In most instances, the credit card company will provide the loss of use coverage, as long as you rent the car using their card. Be sure to check with your credit card company.

Coverage types and amounts vary by company and by state. If you have more than one credit card, compare the difference in coverage and then be sure to rent the car using the card that provides the most protection.

The major credit card networks share two strict rules: In order to obtain the coverage they offer, you must do both of the following.

  1. Pay for the rental car entirely on their credit card.
  2. Refuse the rental company's collision damage waiver.

Some vehicle types may be excluded from coverage, including exotic, expensive, or antique cars, trucks, open-bed vehicles, and off-road vehicles.

What This Means for You

Now that you have the basic information of car rental insurance, you need to make the best decision for your own personal circumstances. If you have full coverage insurance that includes rental cars, getting supplemental insurance is less of a must.

However, if you only have liability insurance, do not have insurance at all, or have insurance that does not cover all the fees discussed above, obtaining some form of supplemental insurance for your rental is best.  If you'd rather be safe than sorry, getting the added protection can prevent unforeseen incidents from causing out-of-pocket expenses.

Photo by Marcin Wichary