Rental car insurance can mean the difference between the trip of your dreams and financial distress. With so many options available for renting a car, planning for the unexpected is increasingly becoming more vital than ever before. Similarly, choosing the right coverage for your rental car can be overwhelming because of the many options available in the market today.
However, if you’re renting a car, it pays to check your existing coverage and assess your rental insurance options. An extra policy for your rental car can make a lot of sense, especially when driving a strange car in an unfamiliar location. In this guide, we’ll help you learn everything about rental insurance to help you make informed insurance decisions.
What Is Rental Car Insurance?
Rental car insurance is a policy designed to protect you against financial losses in case of damages and injuries when renting a vehicle. Ideally, rental car insurance includes theft, damage, and third-party coverage. The policy limits the costs rental companies can charge you for damage repairs. Theft coverage protects you if the rented vehicle is stolen or damaged in a theft attempt. Third-party coverage or liability coverage protects you if your rented vehicle injures someone or causes property damage.
How Does Rental Car Insurance Work?
Rental car companies buy the required minimum auto insurance for their vehicles. However, the minimum required coverage is rarely enough to cover costs, which is why they create some form of rental car insurance to avoid losses if a car renter is unable to pay for damage or loss of the vehicle. Rental car insurance allows you to pay an agreed amount, and their insurance pays the rest. Always check the fine print to know what’s covered and ensure you have coverage for what you need.
Do You Need Rental Car Insurance?
While it’s not mandatory to carry rental car insurance, it’s always a good idea to have it every time you rent a vehicle. However, don’t let anyone bully or coerce you into buying it if you don’t want it. Car rental companies are required to carry insurance on their vehicles, and there is no law stating that you have to purchase rental insurance. Most car rental companies take advantage of this information and ask car renters to buy insurance, making it look as if it’s mandatory.
If you don’t have a personal car insurance policy, it’s essential to carry rental car insurance every time you rent a vehicle. Many people rent cars when traveling during holiday visits or vacations. The unfamiliar terrains, new traffic laws in a foreign land, and overall vulnerability of being in unfamiliar places can increase your chances of theft, accidents, and property damage.
If you have car insurance, check to make sure it extends to rental cars. If it doesn’t, you can ask if you can purchase add-ons to cover a rental car.
Can Personal Car Insurance Cover Rental Cars?
You can use your car insurance as long as your trip is personal. Regular car insurance doesn’t cover commercial activities, meaning auto insurance can’t cover business travel. You might need commercial auto insurance if you’re renting a vehicle for commercial purposes. You can ask your insurance provider to see if you can add commercial coverage to cover the rented vehicle. If you are traveling to Canada or Mexico, your auto insurance may not cover rental cars in those locations. Most standard car insurance companies in the U.S. won’t cover rental cars abroad, so check with your insurance before you go.
Rental Car Insurance Options
If you’ve decided to buy rental car insurance, you may want to know your options to avoid paying for duplicate insurance. There are four options offered through many rental agencies. They include:
1. Liability Coverage
The law requires rental companies to provide the minimum amount of liability insurance. However, this may not be enough to cover injuries and damages other motorists and people on the road may sustain if you cause an accident. If your auto insurance policy has higher limits, it can provide enough coverage when using a rented car. If you don’t own a car, you can purchase a non-owner liability policy, which will offer additional liability when needed.
2. Loss Damage Waiver
Also called collision damage waiver is not technically a type of insurance coverage. With these policies, companies can waive or relieve car renters of financial responsibility if their rented vehicles are damaged or stolen while in their possession. The waiver also covers “loss of use” if the damage to the car renders it unusable until it’s fixed. A waiver only works if the entire incident is accidental. Otherwise, renters must prove they were not speeding, driving while intoxicated, or driving on unpaved roads.
3. Personal Accident Coverage
This coverage protects the driver and the passengers using the rented car if they’re injured in an accident. You should seriously consider this coverage if you don’t have personal injury protection in your car or health insurance, which may cover medical expenses from an accident.
4. Personal Effects Coverage
Personal effects coverage compensates for lost or damaged personal belongings, such as your laptop, phone, clothing, camera, sports gear, and any item damaged in the rented vehicle. This coverage is essential if you don’t have home insurance or renter’s insurance to cover these items.
How Much Does Rental Car Insurance Cost?
Rental car insurance costs vary based on location and the vehicle you’re renting. Average insurance costs range between $30 and $60 per day. If you’re renting the vehicle for a couple of months, this option may not be economical. In most cases, it’s wiser to increase limits on your auto insurance than purchase rental car insurance for more than two weeks.
If you don’t have car insurance and are looking to rent a vehicle for more than three months, you can speak to an insurance company to get a policy to last for that duration. Choose the coverages you will need, such as liability, collision, comprehensive, and personal effects, and pay for the duration you want.
Final Thoughts
It’s important to consider whether rental car insurance can benefit you when driving a rental car, especially when you don’t have personal auto insurance. You want to ensure you’re adequately covered when traveling in unfamiliar places to safeguard your finances if the worst happens. If you have auto insurance, you can revisit the policy and assess your needs to determine whether you need additional coverage or not.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.
