Rental Car Insurance Explained

If you take a vacation or have your car serviced, chances are you will need to rent a car. But many people don’t know that their auto insurance policy doesn’t automatically cover rentals. To get the protection you need, you have to have rental car insurance.

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woman receiving key for rental car

Rental car insurance temporarily covers drivers from financial responsibility for potential liabilities while driving a rental car. While this coverage will be offered to you by your rental car company, you may already be covered, either under your existing insurance policies or by your credit card. You can also buy similar coverage from standalone insurers.

Like regular auto insurance, not all rental car insurance policies are created equal. If you’ve never purchased rental car insurance before, you might not know what you’re looking for. In this article, we’ll break down the different types of rental car insurance available and help you determine which policy is right for you.

Types of rental car insurance

Rental car insurance is somewhat similar to regular auto insurance. You can select the type of coverage and the level of coverage you want based on your needs. However, the types of rental car insurance are much different than auto insurance.

Before getting rental car insurance, you should be aware of your options. The most common types of rental car insurance include:

• Loss-and-damage waiver (LDW): Sometimes called the collision damage waiver (CDW), this is a waiver, rather than a true policy. It essentially says that the rental company won’t come after you in the event that the rental car is damaged or stolen. However, if you have collision and comprehensive car insurance, this may be included in your policy.
• Supplemental liability protection: This covers damage you do to other vehicles or property. However, your own liability insurance may cover you, even when you’re driving a rental car.
• Personal accident protection: Personal accident protection covers the medical costs for you and any passengers if you’re involved in an accident. Again, if you have personal injury protection or medical payments coverage under your existing policy, you may already be covered.
• Personal effects coverage: This coverage pays for any belongings that may be stolen from your rental car. In this case, your homeowner’s insurance or renter’s insurance policy may offer similar coverage.

While there are many different types of rental car insurance, it doesn’t cover everything. For example, you wouldn’t use this type of policy to be reimbursed for the cost of renting a car while your normal vehicle is being repaired as part of a claim. In that instance, you would use what’s known as rental car reimbursement coverage, another option which is included under most typical auto insurance policies.

When do you need rental car insurance?

Knowing when you need car rental insurance isn’t always clear. If you only need a rental car for a few days at most, you may be tempted to skip it. For some people, their personal car insurance policy automatically covers rental cars. So, in what situations is a standalone rental car insurance policy required?

You don’t have any type of insurance

According to financial expert Laura Adams, “If you don’t have auto insurance, you should purchase liability and a damage waiver for a rental car, at a minimum. If you have a non-owner auto insurance policy, it only covers liability, so you should purchase damage protection.”

Driving without any type of car insurance is illegal, and it could land you in serious legal and financial trouble. It’s also advised to not rely on rental car insurance from your credit card company because it’s usually not enough coverage if you get into an accident.

You don’t have collision or comprehensive coverage

If you don’t have collision and comprehensive coverage on your personal auto insurance policy, purchase an LDW. Otherwise, your personal policy won’t cover the repairs if you get into an accident or if something else happens to the car that causes damage.

“If you also have collision and comprehensive auto insurance, they cover physical damage and may extend to a rental car. However, state laws vary, so be sure to check with your insurance carrier,” says Adams.

Keep in mind that all auto insurance policies include liability coverage, which protect you in a legal situation if you cause an accident and get sued.

Adams states, “Knowing whether you should purchase rental car insurance depends on the type of coverage you already have or don’t have. For instance, if you have liability coverage, it follows you when you rent a car. Liability protects you from a lawsuit if you cause injury to someone or their property.”

You’re going on a business trip

If you’re going on a business trip in your personal vehicle, your car insurance policy might have some limitations. For instance, if you got into an accident while driving to a conference or a big meeting, it might not be covered.

Laura Adams says, “Another consideration is whether you’re renting a car for work or your own business travel. If so, your existing personal auto insurance may not cover you. When in doubt, it’s best to purchase rental car insurance. You’ll be glad you did, as even minor damage could be expensive to repair.”

You don’t want to pay a deductible

If you rely on your personal car insurance to protect your rental car, and you get into an accident, you’ll pay a deductible. However, if you buy rental car insurance and you get into a collision, there is no deductible required.

How much is rental car insurance?

The cost of rental car insurance depends on a few factors. For one, it depends on the company you buy coverage from. It also depends on the state, what type of car you’re renting, and how many miles you’re driving. Purchasing add-on coverages will also increase the amount you pay.

Does my credit card offer rental car insurance?

Many credit card companies offer rental car insurance as one of the benefits for cardholders. However, rental car insurance provided by your credit card company is usually secondary insurance. That means if you get into an accident or the car gets stolen, your auto insurance company will get billed first. If that’s the case, your deductible will apply to the claim.

There are some credit card companies that offer primary rental car insurance, although it’s less common. Primary insurance doesn’t go through your personal auto insurance, so you don’t have to pay a deductible. You can call your credit card company to determine if your card offers rental car insurance and what type of insurance they offer.

Most major credit card companies, like Visa, MasterCard and American Express all offer some form of rental car insurance for their cardholders. To take advantage of the coverage, you usually have to pay for the rental car using the card and rent the car in your name.

Which insurance providers offer rental car insurance?

Getting rental car insurance coverage is pretty easy because most major car insurance providers offer it. State Farm, Allstate, Geico and Farmers all offer the option to have some type of rental car insurance coverage included in their regular car insurance policies. If you’re covered, it comes at no additional cost beyond what you’re already paying for your monthly premium.

As stated above, your car insurance policy may offer similar coverage to the loss-and-damage waiver, the supplemental liability protection or the personal accident protection. However, not all car insurance policies are created equal and, as such, not all policies include rental car insurance. It usually comes along with comprehensive and collision policies or supplemental protections with higher coverage limits.

If you’re wondering if you’re covered, the best thing that you can do is to read your auto insurance policy or to ask your insurance agent directly. “Before your next trip, do your homework by reviewing your auto insurance policy or speaking with your insurer about how much rental car insurance you may need,” suggests Adams.

If you do need to purchase standalone coverage, here are some companies that offer it:

Allianz Global

Allianz Global’s Rental Car Damage Protector includes $40,000 in coverage, for just $9 per day, and offers coverage anywhere in the world. Every policy comes with up to $1,000 in coverage for lost baggage and personal items, and $1,000 in trip interruption coverage.

Bonzah

With a RoamRight Auto Rental Insurance Plus policy from Bonzah, you can get up to $35,000 in coverage, plus up to $500 in coverage for lost luggage and personal items, no deductible, and a 10-day free look period.

RentalCover.com

Rental car insurance from RentalCover.com is meant to supplement insurance from your credit card provider. The company claims that drivers can get supplemental insurance for $134 less than an LDW waiver from the rental counter. One of the biggest draws is that drivers can cancel their insurance for a full refund up until their car pick-up time.

Sure

Sure is a mobile-based rental car insurance company that is entirely digital. When you download the app, you can select your trip dates, the type of coverage you want, the deductible, and more. That means you can update and make changes to your reservation on-the-go. Every policy comes with great perks, like flat tire protection and lost key reimbursement.

InsureMyRentalCar.com

InsureMyRentalCar.com offers an LDW with up to $100,000 in protection without a deductible. It covers your rental car anywhere in the world, and if you breakdown, you can get 24/7 emergency roadside assistance. Policies start at just $9.75 per day.

Frequently asked questions

Do you need insurance on a rental car?

The truth is that you should have some type of insurance on your rental car, whether it comes from the rental car company, your car insurance, your credit card or an independent insurer. Accidents do happen and if you aren’t covered or if the cost of the accident exceeds your coverage limits, you could be left with the bill.

Is a rental car covered by my insurance?

Possibly. It depends on which services are included in your individual policy. Your best bet is to read over your policy before you rent a car or to call your insurance agent directly so you can get your questions answered.

How will an accident in a rental car affect my insurance?

Getting into any accident will affect your insurance premium, whether it’s in your car or a rental car. This is especially true if you have rental car insurance through your auto insurance provider or a credit card company. Anytime you file a claim that is attached to your auto insurance policy, the company will know you had an accident and will likely increase your rate accordingly.