When you’re renting a car during a vacation or business trip, it’s essential to be prepared for the unexpected. Rental car insurance can mean the difference between a smooth, enjoyable trip and a financial nightmare. This type of insurance comes in several different forms to suit the needs of different travelers, so you’ll want to properly weigh your options before you buy. Check out this helpful guide to make an informed decision on rental car insurance coverage.
What Is Rental Car Insurance?
Rental car insurance refers to insurance coverage that protects you from financial loss in the event that your rental car is damaged or stolen. In most cases, your car rental will include some form of insurance, but the coverage is often minimal. If you happen to get involved in a major accident, you could end up being responsible for significant expenses. Depending on your situation, it may be worthwhile to purchase extra rental car insurance coverage from your rental agency so that you can minimize your financial risk.
Rental car insurance is sometimes confused with rental car reimbursement, but they aren’t the same thing. Rental car reimbursement is an auto policy option that pays for the cost of renting a car while your own vehicle is being repaired as part of a claim. Rental car insurance, on the other hand, covers damages that may occur when you’re renting a vehicle.
What Are the Different Types of Rental Car Insurance Coverage?
If you decide to buy rental car insurance, you have a number of options to choose from. The following are the main types of coverage available at a rental agency:
If you’re the at-fault party in an accident, you’ll be held liable for the property damage and injuries that occur to other motorists involved. Liability coverage pays for your losses in such a situation, but it doesn’t cover damage to your rental car or your injuries. The extent of the protection you’ll receive depends on the coverage limit you choose. So, if you’re going to be cruising in a wealthy neighborhood alongside luxury and exotic cars, you may want to opt for a higher policy limit.
Loss or Collision Damage Waiver
Loss damage waiver (LDW) is a coverage that waives your responsibility for any damage to your rental car in the event of an accident, a total loss, vandalism, or theft. A collision damage waiver (CDW) provides similar protection, except that it doesn’t cover car theft. These two coverage options are basically comprehensive and collision insurance for rental cars.
Note that if your rental car is damaged and needs to spend some time at an auto repair shop, your rental agency may require you to pay a fee for each day the vehicle is out of commission. LDW also covers these fees.
Personal Accident Insurance
The purpose of personal accident insurance is to protect you from medical expenses if you sustain injuries in an accident, regardless of whether you’re the responsible party. This coverage also applies to any passengers who are traveling in your rental car. It works the same way as personal injury protection (PIP) or medical payments (MedPay) coverage on a regular vehicle.
Personal Effects Coverage
This rental car insurance coverage option pays for your losses if personal items are stolen from your rental car. This could be anything from electronics and sporting goods to jewelry and clothing.
Do Your Existing Insurance Policies Cover Rental Cars?
If you’re traveling in the United States or Canada, your existing insurance policies usually extend to your rental car. You’ll receive the same types and limits of coverage for your rental car that your policies provide for your everyday ride. If you’re getting adequate protection from your other insurance policies, you probably don’t need to purchase rental car insurance.
Let’s take a look at how your auto, home, and health insurance policies protect you when renting a car:
If your auto insurance policy includes liability, collision, and comprehensive coverage, you already have most of the types of coverage available at a car rental agency. Such a policy will cover the damages you cause to other drivers in an at-fault accident and damage to the rental vehicle due to a collision, theft, or vandalism.
Depending on your car insurance coverage limits, you may find it unnecessary to get liability coverage and LDW or CDW for your rental car. If you have PIP or MedPay in your auto policy, you can probably forego personal accident insurance as well. However, you should bear in mind that filing a claim with your auto insurance company can cause your premiums to go up in the future.
If you get injured in an accident while driving a rental car in the United States or Canada, your health insurance may cover your medical bills. However, you need to pay your health deductible before your policy kicks in. The personal accident insurance from a rental agency doesn’t require a deductible.
Homeowners or Renters Insurance
In general, your homeowners or renters insurance policy should cover your personal belongings if they’re stolen, even when you’re traveling outside the United States. To file a theft claim, you usually need to obtain a police report and pay a deductible.
Does Your Credit Card Provide Rental Car Insurance Coverage?
If you rent a vehicle in your name and use your credit card to pay the rental agency, you’ll most likely get some form of coverage. This is especially useful if you’re traveling in a place where your car insurance won’t cover you. If your credit cardincludes rental car insurance, the coverage will automatically apply, so you don’t need to fill out a form or make a phone call. However, it’s usually secondary coverage, meaning it’ll only start paying after your auto insurance is exhausted.
Before you purchase rental car insurance coverage, carefully check your auto, home, and health policies and credit card benefits to find out exactly what you’re covered for when renting a vehicle. Then, you can go ahead and get the types of coverage you don’t have. Also, make sure your coverage limits are high enough. After all, you’ll need more protection when you’re driving in an unfamiliar place.
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.