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Rental Car Insurance Options: Do I Need Additional Coverage?

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Rental Car Insurance Options: Do I Need Additional Coverage?

When you step up to the rental car counter, you'll fill out some paperwork before the company hands over a vehicle. Along with basic personal information like your name and address, you'll also have to provide a copy of your driver's license. Then, you'll hear a question you may not know the answer to: "Do you want rental car insurance?"

Customers often don't know whether they need rental car insurance since they may access benefits through their auto insurance policy or a credit card company. Here's what you need to know about rental car insurance and when it makes sense to buy it.

What Are the Different Types of Rental Car Insurance Coverage

There are four different types of coverage available through most rental car agencies. They include collision damage waiver (also known as loss damage waiver), supplemental liability coverage, personal accident insurance, and personal effects coverage. 

The collision damage waiver is the most common. It shields you from personal liability if the rental car is damaged or stolen while in your possession. However, depending on the terms of the waiver, you may still be on the hook for a deductible. Note that collision damage waivers don't cover damage to other people's property or injuries in the event of a wreck. It only covers the rental vehicle itself.

Supplemental liability insurance covers the medical expenses for individuals hurt in an accident involving the rental car. It may also pay for damages to their vehicle. Supplemental liability insurance kicks in if you're responsible for the accident

Personal accident insurance covers your medical costs, including hospital stays and ambulatory expenses, in the event of a collision. Personal accident insurance may also provide death benefits if you die while driving the rental car.

Personal effects coverage reimburses you if someone steals your personal belongings from the rental car. It may cover items like a purse, wallet, or baggage.

Does My Personal Auto Insurance Cover Rental Cars?

In most cases, yes. If you have an existing auto insurance policy, it should provide the same coverage that you have for your personal vehicle. Depending on the type of policy you have, your coverage may include liability, collision, comprehensive, and personal injury protection. However, you'll still be responsible for paying your deductible before your insurance policy kicks in.

To confirm that your insurance coverage applies to rental cars, review your insurance contract or reach out to your insurance company. That way, there's no confusion, and you understand precisely what your policy covers.

What Coverage Do Credit Cards Offer for Rental Cars?

Some credit card networks provide rental car coverage, providing you meet their qualifications. To get coverage, you may need to pay for the rental car using your credit card and decline the company's collision damage waiver.

The benefits available through rental car insurance from credit cards may include primary or secondary coverage. Under primary coverage, the credit card network pays for damages before your personal auto insurance policy. With secondary coverage, your insurance policy pays first, and the credit card coverage only kicks in if necessary.

Most credit card insurance benefits only pay for damage to the rental car. It won't pay for medical expenses or damage you cause to other vehicles. It also won't cover items stolen from your rental car or for the mechanical breakdown of a rental vehicle.

Some credit cards provide coverage if someone steals your rental car. Your credit card coverage may also pay for towing expenses or loss-of-use charges, which a rental company may charge if it must take a vehicle out of service for repairs.

To find out whether your credit card company includes rental car coverage and the benefits available through your policy, review your credit card terms and conditions or check with the card issuer. 

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When Should I Consider Buying Additional Rental Car Insurance?

Do I need rental car insurance? Is it an unjustifiable extra expense or worth paying for? While there is no firm yes or no answer, there are a few circumstances where purchasing it might make sense.

You might want rental car coverage if any of these situations apply to you:

  • High deductible: If your insurance policy has a high deductible, such as $1,000 or more, paying for rental coverage might be worth it. While some collision damage waivers have deductibles, they may be lower than what you have through your policy.

  • No comprehensive or collision coverage: If you only have liability coverage, it won't pay for damage to your vehicle in an accident. Buying the additional coverage can give you peace of mind if something happens.

  • Avoid claims on your policy: If you file a claim on your personal auto insurance policy, your insurer may raise your rates. You can protect yourself by purchasing coverage through the rental car agency.

  • Outside your coverage area: If you're renting a vehicle internationally or in a state your insurer doesn't operate in, you must purchase coverage from the rental car company. Some insurers will cover travel in Canada but not in other countries. 

If you don't have an existing auto insurance policy, rental car companies will require you to buy their coverage before finalizing the contract. In that case, you don't have a choice. 

How Can I Determine the Right Amount of Coverage for My Rental Car?

Ultimately, deciding how much rental car coverage you need depends on your legal responsibilities and risk tolerance. At a minimum, you must have enough coverage to meet state requirements and the terms of the rental car agreement.

To decide whether you need additional rental car coverage, consider where your benefits are lacking. For instance, maybe you have a high deductible, so paying a little extra for a no-deductible collision damage waiver might be worth it. Or, perhaps you're moving across the country with some of your most prized possessions, so purchasing personal effects coverage would make sense.

To get the most out of rental coverage, review your personal insurance policy, credit card benefits, and circumstances, then decide whether you need additional protection. 

Don't Automatically Turn Down Rental Car Insurance

You may still want rental car coverage even if you have personal auto insurance and credit card benefits. Using rental car policies can shield you from high deductibles and insurance claims that drive up your rates. It can also fill in gaps, such as providing comprehensive or collision coverage if you have a liability-only policy. Before deciding to decline rental coverage, determine what your personal auto insurance covers and what credit card benefits are available to you. Then, you can choose whether to opt-in to your rental car agency's additional coverage. 


Frequently Asked Questions

Does my auto insurance cover rental vehicles?
Your personal auto insurance plan may extend to a rental car but may not include enough coverage, even though most personal auto insurance policies provide the same coverage for rental car accidents as they do for your own vehicles. Many major auto insurance carriers  extend coverage to rental cars. Review your policy to see if it has the coverage types that apply to rental car accidents, as several coverage types do.
Will my insurance increase after a claim?
The short answer is yes. Getting into an accident (even when it is not your fault) will also likely increase your premium regardless of if you file a claim. Based on our data, we observe that both not-at-fault and at-fault accidents see at least a 5% increase after the incident - this figure go as high as 56%.
Is rental car insurance covered by my credit card?
There are some credit card providers that offer rental car coverage, especially when using the card to make the reservation. Be sure to contact your credit card company to confirm coverages and restrictions prior to making any rental car reservations.

Premiums are sourced from over 30,000 zip codes across 200 insurance companies. We estimate premiums based on public filings for policies seeking 50/100 in liability with $500 deductibles for collision and comprehensive coverage. Estimated rates are based on a 35-year-old single female with a good credit score and no history of accidents or violations driving a 2023 Toyota RAV4 LE. We partner with Quadrant Information Services to source our data and assume no unique benefits or discounts are applied for these rates (unless otherwise stated). Your own rates may be different.