Rental Car Insurance

How to Determine if You Need Rental Car Insurance

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Renting a car can be convenient when you need transportation for a trip or if your own vehicle is in the shop. However, it also comes with some financial risks. If the rental car gets damaged or stolen, you could be on the hook for paying costly repair or replacement fees. That’s why it’s important to understand if you need to purchase the rental company’s insurance or if your existing auto policy will provide adequate coverage. Follow this guide to make the right insurance decision when rental car insurance.

Check Your Own Auto Insurance Policy

The first step is to check your own auto insurance policy to see if it provides rental car coverage. Many standard policies do include some level of coverage for rental cars. Here’s what to look for:

Liability insurance: This covers injuries or property damage you cause to others while driving the rental car. It satisfies the state minimum liability coverage requirements.

Comprehensive and collision coverage: This pays for damage to or theft of the rental car itself. It may be listed as an add-on or riders to your policy.

Personal effects coverage: This pays for theft of items from the rental car. It usually has limits of $1,000 or less.

Roadside assistance: This provides towing and help with keys locked in the car or flat tires. 

If your policy includes comprehensive and collision damage coverage for rental cars, you may be able to decline the rental company’s collision damage waiver (CDW) which can cost $15-30 extra per day. However, your policy may not offer full coverage so read the details carefully.

Examine Policy Limits and Deductibles 

Don’t just look to see if your policy covers rental cars. Also check the limits and deductibles which can vary widely:

Liability limits: These should be at least $100,000 bodily injury per person, $300,000 per accident. Lower limits may not be enough.

Comprehensive/collision limits: These help cap your out-of-pocket expenses if the rental car is damaged or stolen. Limits vary but $35,000 is common.

Deductibles: How much you pay out-of-pocket before insurance kicks in. Could be $500 to $1,000 for rental cars.

If the limits seem too low or deductible too high, paying for the rental company’s insurance may be worthwhile.

Watch Out for Exclusions  

Even if your policy covers rental cars, many have exclusions where you would not be covered:

Expensive or exotic car rentals: May exclude coverage for luxury vehicles, sports cars, SUVs over a certain value. 

Business or commercial use: Won’t cover rental cars used for business trips.

Rentals over a certain number of days: Typical cap is 14-30 days so longer rentals may not be covered.  

Locations outside the U.S.: Foreign country rentals may not be covered.

If any of these exclusions apply, seriously consider the rental company’s insurance offer. You don’t want to take risks driving uninsured.

Compare Rental Company Insurance Options

If your existing policy doesn’t seem to provide adequate rental car coverage, you will likely need to buy supplemental insurance from the rental agency. Here are some common options:

Collision Damage Waiver (CDW): This covers damage to the rental car. It may or may not have a deductible so ask first.

Loss Damage Waiver (LDW): Similar to CDW but covers theft and vandalism in addition to collision damage.

Liability insurance supplement: Adds additional liability protection beyond your own policy.

Personal effects coverage: Provides some compensation for stolen items.

Though expensive, rental company insurance is convenient because it is billed automatically with the car rental. Just be sure to opt out if your own policy has you covered sufficiently.

Use a Credit Card for Coverage

One last option is to check whether the credit card you will use to pay for the rental car provides insurance protection. Many cards do offer some level of coverage, such as:

Collision damage waiver: Similar to what rental companies offer.

Secondary liability coverage: Kicks in after your own policy’s liability limits are reached.

Roadside assistance: Help with lock outs, jump starts, towing, etc.

Rental reimbursement: Pays for a rental car if your own is in the shop after an accident.

The coverage varies quite a bit among issuers, and may have limits or exclusions. Be sure to check with your card issuer in advance so you know what protection you can expect. Using the right credit card can provide a layer of insurance without having to buy costly rental company options.

Weigh the Cost vs. Risk

Ultimately the decision comes down to weighing the cost of added rental car insurance versus the financial risk you’d take on without it. If you have excellent coverage through your own policy or credit card, buying supplemental insurance may not be worth the extra cost. But if there are coverage gaps or high deductibles/limits, the peace of mind may justify the added expense of rental company insurance. Think through the scenarios of what could go wrong and whether you could afford the out-of-pocket expenses. Also consider the value of the rental car and where you will be driving it. Higher risk calls for more insurance protection. Use this guide to make the right call for your own rental car insurance needs.

Q1: How do I determine if I need rental car insurance?

To determine if you need rental car insurance, first, check your existing auto insurance policy. If it covers rental cars, you may not need additional coverage. Secondly, consider your credit card benefits; some credit cards offer rental car insurance as a perk. Finally, assess your personal comfort level and the value of the rental car. If you’re unsure, it’s wise to consult with your insurance provider or the rental car company.

Q2: What types of rental car insurance are commonly offered?

Common types of rental car insurance include Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW), which cover damage to the rental car. Liability insurance covers injury you may cause to others. Personal Accident Insurance (PAI) provides coverage for medical expenses, and Personal Effects Coverage (PEC) covers your personal belongings in the rental car.

Q3: Can I decline rental car insurance if I have comprehensive coverage on my personal auto policy?

Yes, you can often decline rental car insurance if you have comprehensive coverage on your personal auto policy. However, it’s crucial to check with your insurance provider to ensure that your policy extends to rental cars and provides adequate coverage.

Q4: Is rental car insurance required by law?

Rental car insurance is not required by law in most places. However, liability coverage is typically mandatory. You can use your personal auto insurance or purchase insurance through the rental car company to meet these requirements.

Q5: What should I do if I get into an accident with a rental car?

In the event of an accident with a rental car, first, ensure everyone’s safety and seek medical attention if necessary. Then, report the accident to the rental car company and local authorities as required. If you have rental car insurance, contact your insurance provider to initiate the claims process.

Best Guide: Choose Auto Insurance 

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