The time to figure out whether or not you should buy rental car insurance is long before you’re standing at the rental counter. While it’s not a complicated decision, there are several factors to consider.
It’s a good idea to have some basic knowledge of car insurance terminology so you can feel confident about what you’re buying, or not buying.
Liability insurance helps pay the medical costs and property damage for other drivers and their cars in the event of an at-fault crash. Liability coverage is required by state law in 49 states and the District of Columbia. Unless you live in New Hampshire (and even if you do), you almost certainly have liability coverage if you insure a car.
Comprehensive, sometimes called “comp,” insurance covers your vehicle if it is damaged while it is not being driven, as well as theft from the vehicle. Collision helps to pay for damage to your car after a crash, no matter the cause. Many drivers drop both comprehensive and collision coverage for high-mileage vehicles.
Personal Injury Protection pays for medical expenses for you and your passengers in an at-fault accident.
Uninsured and Underinsured Motorist Protection pays for economic losses like lost wages and medical bills if you’re injured in an accident caused by someone who doesn’t have insurance. The underinsured portion makes up the difference if the at-fault driver has some coverage but not enough to cover your losses.
Similar protections are extended to car rentals, but with somewhat different labels. These protections are not insurance, technically, but work similarly.
Collision Damage Waivers (CDW), also known as Loss Damage Waivers (LDW), protect renters financially in case of damage or vehicle theft. When you purchase a CDW, the car rental company is waiving its right to collect money from you if the vehicle is damaged. These coverages typically exclude damage to the undercarriage, roof, tires, windows, interior, windshield, and side mirrors.
Supplemental Liability Coverage offered at the counter kicks in if you’re involved in an at-fault, and protects renters from lawsuits.
Personal Accident Insurance, much like personal injury protection on a regular car insurance policy, covers medical costs in the event of an accident.
Personal Effects Coverage ensures what is inside the rental car in case of theft, similar to what comprehensive coverage will cover in case of theft on a typical auto insurance policy.
The costs associated with purchasing damage waivers and other supplemental coverages can add up quickly. On the lower end, a CDW or LDW might add $10 per day to your overall cost. In some cases, however, the daily fee can be as high as 50 percent of the rental rate, quickly pushing the cost per day upwards of $50 depending. The good news is that a large percentage of drivers can skip some or all of these coverages worry-free, as long as one of the following circumstances applies.
Chances are, if you have a vehicle and keep it insured, you can decline Supplemental Liability Insurance and Personal Effects Coverage offers. While you should consult your policy documents to make sure, most auto insurance policies extend these coverages to rental cars, provided the driver is driving the vehicle for personal uses.
If you carry comprehensive and collision coverages, you may also be able to decline the CDW. These coverages typically apply to rental cars, as well. The same holds for Personal Accident Insurance. Remember, on your auto policy, this coverage is usually called Personal Injury Protection.
Some credit card companies offer supplemental rental car coverage to cardholders who charge the rental to the card. This coverage usually covers damage or theft but only kicks in after your auto insurance is applied. Still, this coverage can be valuable, mainly because it can reimburse you for your auto policy’s deductible.
A few cards offer a primary coverage benefit. If you pay for your rental with a card that provides primary coverage benefits, you likely won’t have to deal with your insurer at all.
Some traveler’s insurance policies offer collision or comprehensive benefits for car rentals. Be sure to read these agreements carefully before declining these coverages if you don’t have a personal auto policy or credit card coverage.
If you have health insurance, you can safely decline Personal Accident Insurance if you won’t have passengers in your rental car, or if you are confident they also have health insurance.
A homeowner or renters insurance policy may cover you in the event of property theft from your rental car. Again, check your policy carefully.
Consider buying rental car insurance if one of these situations applies:
You don’t have personal auto insurance
Your auto insurance coverage has very low limits or a very high deductible
You’re traveling internationally, as most US-based policies are not valid out of the country
You’re traveling for business, as most personal auto policies do not cover business use
You’re worried about a rental car accident or incident impacting your own auto insurance policy rates
You want more peace of mind
If your auto insurance does not cover rentals or you need to protect your rental for another reason, there is another option aside from purchasing coverage at the counter.
A standalone policy purchased by a third party company might meet your needs. These policies can also be helpful if you have low policy limits you would like to supplement or when you are traveling internationally. Standalone policies are typically less expensive than the coverages offered by rental agencies.
Before you prepare for your trip, take the time to consider your rental car insurance options. Most drivers already have coverage for the most expensive supplemental rental coverage, the CDW or LDW. On the other hand, some rental car drivers are unpleasantly surprised to find they did not have adequate coverage when damage or theft occurs. With a little pre-planning, you can avoid this unfortunate situation. To find auto coverage that includes rentals, start a quote with PolicyScout.