Have you debated adding insurance from the rental car company at checkout? Keep reading to learn what coverage options you may have built into your credit card perks and existing auto insurance policy.
Keep reading to save time, money, and headache at the checkout counter for your rental vehicle!
Do You Need Rental Car Insurance?
If you do not have an existing car insurance policy with full coverage, then you will need to purchase rental car insurance.
Rental car agencies like Hertz and Enterprise will require proof of insurance before renting their vehicles. Luckily, you can buy their stand-alone rental car insurance policies if you do not have an existing insurance policy.
Follow our step-by-step guide to understand your options when renting a car!
Step 1: Understanding Rental Car Insurance
Rental Car Insurance covers the rental vehicle if lost, stolen, or damaged. This coverage is similar to regular car insurance but is offered directly by the rental car agency.
There are four different types of policies offered by rental car companies.
- Rental Car Liability Insurance
- Rental Car Loss-Damage Waiver
- Personal Accident Insurance
- Rental Car Personal Effects Coverage
Pro Tip: Rental Car Insurance is not the same coverage as Rental Reimbursement Auto Insurance which pays for the daily cost of a rental vehicle after a claim.
Step 2: Does Your Regular Car Insurance Cover a Rental Car?
Regular car insurance policies, including comprehensive and collision insurance, cover rental cars within the United States.
Pro Tip: Contact your insurance company and ask, “What does my insurance policy cover if I rent a vehicle?” If it does, you can save money by waiving the rental companies’ offer of extra insurance.
Here are some situations where your regular insurance policy will not “extend” coverage to the rental vehicle:
- Cars rented abroad are not covered by a United States policy
- If the vehicle on the policy is much cheaper than the rental car, you may experience difficulty getting your insurance company to pay for the expensive rental car
- Unless the policy covers business use, personal insurance policies do not cover rental cars on business trips.
- If your regular car insurance does not have full coverage, then you will have no coverage for damage to the rental vehicle
Keep reading, and we’ll dive into how you can design your existing car insurance policy to give you automatic coverage for your rental!
Step 3: Rental Car Insurance vs. Your Own Auto Insurance
Regular Auto Insurance policies often cover rental cars if you have full coverage. Because of this, the insurance offered by the rental agency may be redundant, and if you don’t need to purchase the rental car agency’s insurance, you save money!
What Does Regular Car Insurance Cover When Renting a Vehicle?
An existing policy covers many expenses after an accident (so long as the existing policy has comprehensive and collision coverage).
Similarly, the liability portion of your car insurance policy extends to a rental vehicle. Liability lawsuits arising from an accident while driving your rental vehicle are covered up to the limit of your regular insurance policy.
Pro Tip: Without Comprehensive Coverage, insurance won’t pay for stolen, vandalized, or weather-damaged vehicles.
Why You Should Have High Liability Limits
Policyholders should have high liability limits to protect their finances in the event of an accident.
When a driver is at fault for an accident, some of the large expenses they are responsible for include:
- Damage to other vehicles or property
- Death, Injuries, and medical expenses for other drivers and their passengers
- Rental car needs of the other driver while their vehicle is being repaired
Pro Tip: Having low limits for liability insurance will leave the at-fault driver with the remaining balance the insurance doesn’t cover. Increasing liability limits is fairly affordable. Often, a few extra dollars a month can provide more than a hundred thousand dollars in liability protection.
Step 4: Understanding Types of Rental Car Insurance Offered by Rental Agencies
There are four main types of rental car insurance offered by rental agencies. The following is a list of those coverages and quick explanations to help you decide what’s appropriate for your situation!
Rental Car Liability Insurance
Rental car liability insurance is a supplemental liability policy that covers the property damage and medical expenses of other parties in an accident when driving the rental car. A regular auto or umbrella liability insurance policy covers these expenses in the United States.
Rental Car Loss-damage Waiver Insurance
Rental Car Loss-damage Waiver Insurance covers any damage or a stolen rental car. Typically the waiver has a deductible.
Personal Accident Car Rental Insurance
Personal Accident Car Rental Insurance covers death, ambulance, and medical expenses for the rental car driver and their passengers.
Pro Tip: When abroad, other travel insurance will provide a better umbrella insurance policy that will cover medical expenses in more scenarios than this policy offered through the rental car company.
Rental Car Personal Effects Coverage
Rental Car Personal Effects Coverage will help to reimburse the value of personal items stolen from a rental car (there is a dollar amount limit to the coverage).
Bonus: Credit Cards with Rental Car Insurance Coverage
The best rental car insurance credit cards are Chase Sapphire Reserve and Capital One Venture X Travel Rewards. These two cards offer complimentary primary coverage within the United States. That may save the hassle of filing a claim with auto insurance and prevent a premium increase.
We compared ten popular credit cards with a complimentary Collision Damage Waiver (similar to Rental Car Coverage). Keep in mind, you must pay for the rental vehicle with the card you’d like to use the coverage on for the benefits to apply.
Pro Tip: The primary policies available through American Express offer better coverage than most of the complementary policies.
| Credit Card | Is the Coverage Primary or Secondary in the United States? |
|---|---|
| American Express Gold Card | Primary Available for Purchase |
| American Express Platinum Card | Primary Available for Purchase |
| Bank of America Travel Rewards | Secondary Coverage |
| Capital One Venture X Travel Rewards Credit Card | Primary Coverage |
| Chase Freedom Unlimited | Secondary Coverage |
| Chase Sapphire Reserve | Primary Coverage |
| Costco Anywhere Visa Card by Citi | Secondary Coverage |
| Ink Business Preferred by Chase | Primary When Rental Car is Used for Business |
| Ink Business Cash by Chase | Primary When Rental Car is Used for Business |
| Southwest Rapid Rewards Premier | Secondary Coverage |
Using Your Credit Card for Rental Car Insurance
Select credit card companies offer Collision Damage Waiver when you pay for the rental vehicle with their card.
What’s Covered In a Credit Card’s Collision Damage Waiver?
The primary insurance coverage CDW offers is cash value replacement of the rental vehicle.
Some cards may also cover loss of use charges from the rental car company, while others even provide extended travel protection if you call in advance.
What’s NOT Covered With a Credit Card’s Collision Damage Waiver?
Collision Damage Waiver has a few deficiencies in coverage that need to be listed. For one, CDW does not cover any liability insurance. This means that if there’s a lawsuit for injury, property damage, and most general lawsuits, CDW will not help.
Here are some other things CDW does not cover:
- Antique, luxury, or expensive vehicles are often excluded
- Within the United States, renters typically must also file with their auto insurance company because the CDW only covers what the policy does not
- Many policies do not cover rental vehicles worldwide
- Open-bed trucks, and large passenger vehicles are often not covered
The Bottom Line: Should I Get Rental Car Insurance?
When renting a vehicle, it is recommended to have either a regular car insurance policy with full coverage, an in-house insurance policy provided by the rental agency, or both.
Car insurance is required to rent a vehicle, and car rental businesses have full discretion to require the purchase of their in-house insurance coverages if you do not have a regular car insurance policy with full coverage.
Call your insurance agent and ask about your car insurance policy and whether it extends coverage to a rental car before purchasing anything!
Frequently Asked Questions
Will my Collision Damage Waiver cover me in an accident?
The collision Damage Waiver covers the rental car but does not cover liability or medical expenses in an accident. This coverage is offered through a rental car company or as an additional credit cardholder benefit.
Can I add rental car insurance after an accident?
Any insurance coverage added after an accident will not provide coverage for the accident.
Can I add rental car insurance later?
Additional coverage can be purchased later, but the rental company will inspect the car for damage before issuing any coverage.
How long does an accident increase insurance rates?
Insurance rates are affected by an accident for three to five years, depending on the insurance company.
References
(2022). The Four Types of Rental Car Insurance. Allianz Travel. Retrieved December 2, 2022, from https://www.allianztravelinsurance.com/travel/rental-cars/rental-car-insurance-explained.htm?accam=F202942&gclid=Cj0KCQiA4aacBhCUARIsAI55maG2jX5g4E5Xytz-d3wIp_Pk58exusMY91vZwL5DdCYH56yS9r6l-qMaAg51EALw_wcB
(2022, September 7). Primary Vs. Secondary Car Rental Insurance Coverage. Forbes Advisor. Retrieved December 2, 2022, from https://www.forbes.com/advisor/credit-cards/primary-vs-secondary-car-rental-insurance-coverage/
(2014, June 30). Why You Don’t Need to Buy Extra Car Rental Insurance. CNN Money. Retrieved December 2, 2022, from https://money.cnn.com/2014/06/30/pf/insurance/rental-car-insurance/index.html
Jesse Cunningham V is a professional writer and licensed insurance agent. He has worked in the insurance industry in different capacities, starting as a customer service representative and working his way up to an independent agency owner. He is licensed in the states of Maryland and Pennsylvania for Property, Casualty, Life, and Health products. Jesse has worked with many national carriers, including Nationwide, State Farm, Travelers, and Liberty Mutual, and specializes in car and home insurance and health, life, accidental death, and disability insurance. He writes for multiple publications including FIXD and Bauple.com. All articles by Jesse are opinion-based. Speak with your licensed insurance agent about the particulars of your insurance before making any decisions.
