Rental Car Insurance: Do You Really Need It?
When you’re renting a car, the agent will probably ask if you’d like the optional rental car insurance. This insurance is designed to protect you against any financial or other risks should you get into an accident. You don’t have to purchase it from the car rental agency. Other sources include a third-party company, your credit card, or your own personal car insurer as part of your current policy. Before spending more money, make sure you know how car insurance works, and if you already have rental car coverage. It can save you a lot of money twice-over. Firstly, you won’t be paying double for the same coverage. Secondly, you will be protected against liabilities and damages while renting a car.
What Does Rental Car Insurance Cover?
Car insurance is generally broken up into four parts:
- Supplemental Liability Insurance (SLI), which protects against damage that you cause with the car to other people’s lives and property. It’s the equivalent of liability insurance in your personal auto insurance policy.
- Loss Damage Waiver (LDW)/Collision Damage Waiver (CDW), which is similar to the collision and comprehensive policy on personal vehicles. It covers any expenses incurred if the car is damaged or stolen, such as:
- Lost or destroyed vehicle repair and replacement
- Fees for towing and other administrative costs
- “Loss-of-use” costs (fees rental companies charge to make up revenue when the car is out of use).
If you don’t have comprehensive and collision insurance in your personal car insurance, CDW protection can be worthwhile. Without it, you may be responsible for damage to the rental.
- Personal accident insurance covers any medical expenses you or your passengers experience due to an accident. This may not be as critical if you already have personal health insurance.
- Personal effects coverage protects your personal items if they get stolen from your rental car. This insurance can be ignored if your rental or homeowner’s insurance already provide this coverage.
These are not the only types of rental car insurance. There are additional endorsements you may be able to purchase. The previously mentioned four policies don’t cover all possible situations. Let’s say you were using a rental car while your regular car is being repaired by an insurance claim. If you wanted to be reimbursed for the rental, you would need rental car reimbursement coverage.
How Much Is Rental Car Insurance?
The cost of rental insurance will vary by company and the coverage you select. Regardless of that, rental car insurance may be expensive. It can cost between $10 and $30 per day for LDW, and an additional $10 for SLI. Expect to pay another $5 per day each for personal accident and personal effect coverages. Together, you can be paying an extra $30-$50 on top of your daily rate. This can cause your rental costs to grow significantly, especially for an economy car.
Do I Need Rental Car Insurance?
It really depends on whether or not you already have the right types of coverage from some other source. Review your auto and homeowner’s insurance policy to see what coverages you’re already paying for. Check in with your credit card issuer as well. You will want to check if there are any benefits available from the card. When reviewing these policies, you’re not only checking to see if the appropriate coverages are there. You want to make sure the coverages and limits are sufficient for your needs.
Generally, it may be worthwhile to get coverage from the rental company if you have minimal coverage otherwise. As safe of a driver as you may be, accidents can occur. They may or may not be your fault. Without the right coverage, your costs can exceed your policy limits. You don’t want to be responsible for a large out-of-pocket bill.
Other reasons to purchase rental car insurance:
- Business travel: If you’re on a business trip, your personal car insurance may or may not protect you. It may protect you if your trip is a mix of business and pleasure. In that case, check with your car insurance agent to find out what is covered. If your trip is 100% business, then your personal car insurance may not give any coverage.
- Renting a car abroad: Most U.S. car insurance policies do not cover driving outside of the U.S. Some may cover driving in Canada or Mexico (you may be required to purchase additional endorsements). Credit cards may offer some protection, but it’s still best to check with the issuer. In both cases, you will want to know what protections are offered, the limits, and any exclusions from the benefits. It’s possible that many popular destinations, like Italy, Ireland, Australia and India are not covered.
Are You Already Covered?
To check and see if you have the right coverages at the necessary amounts, you can use the steps below. If you’re fully covered, then purchasing rental car insurance may be a waste of money.
- Review your personal car insurance policy. It’s likely that you’ve already got most of the common insurance coverages from your personal policy. Ask yourself the following questions.
- Do you have enough liability insurance? State law usually mandates that car insurance policies provide liability insurance. This helps offset costs related to other people’s medical expenses and property damage if you are at fault. Liability insurance usually travels with the insured person when purchasing a rental car. If you’re fine with the coverage you have, you may wish to decline the supplemental liability.
- Does your policy provide comprehensive and collision coverage? With comprehensive coverage, you’re protected against incidents not related to driving, like theft, vandalism, and fire. Collision coverage pays for damages related to an accident. Comprehensive and collision insurance are not common, especially with people who have older cars. It’s dropped if the car owner cannot justify major repairs to an aging vehicle with high mileage. If you have collision and comprehensive insurance, you may decline LDW.
- A note about rental reimbursement. Many personal car policies have rental reimbursement coverage. This is not the same as rental car insurance. Rental reimbursement covers the cost of renting a car while your own car is being repaired due to an insurance claim. It does not usually cover rental car insurance. To see if it’s included in your current policy, contact your insurance provider.
- Review your health insurance policy. Renters who have ample health insurance coverage may choose to decline personal accident insurance from the rental company. The same holds if your personal vehicle insurance offers medical payments and/or personal injury protection.
- Check your other policies, like homeowner’s or renter’s insurance. You may already have insurance through a policy that you currently pay for. Review your renter’s or homeowner’s policy to see if it covers traveling with your belongings in a rental car. If it does, you can decline the personal effects coverage from the rental car company. Pay attention to the coverage limits. You may need extra coverage against expensive items or certain valuables.
- Look at the terms of your travel insurance. Your travel insurance may cover collision coverage for rental cars, similar to LDW. This coverage may be offered at a lower cost. It’s very important to determine if the coverage offered is primary or secondary. If your coverage is primary, your own insurance company will not be involved in the claim. Secondary coverage means your own insurance company must be involved in the claim first before the travel insurance applies.
- Ask what benefits your credit card offers. Paying for the rental on your credit card provides protection and benefits that can eliminate the need for additional insurance. The specific offerings will vary by card and by issuer. Your coverage may be limited to a given time frame, like 15 or 30 consecutive days, or a financial limit.
Commonly covered claims include theft and towing. Less common are medical benefits, personal property, and loss-of-use protections. Card companies may exclude certain vehicles or rentals in specific countries. Luxury cars and full-size vans are often excluded. The issuers may choose not to insure under these conditions due to the higher risk involved. To make sure your rental will be covered, you may choose to contact your credit card issuer before you rent.
Most credit cards provide secondary coverage, which means they fill in the gaps not met by your personal vehicle insurance. It’s also important to note that you will often have to decline the rental company’s coverage to use these benefits. For more information on cards with car rental coverage, click here.
You will be responsible for damage to a rental car if you get into an accident. Therefore, it is critical that you have sufficient rental car insurance to avoid being liable for the repair costs. Rental car companies make a lot of money when you purchase their insurance. Their agents may be motivated to upsell to you so that you accept the coverage at the point of signing. If you don’t know how much coverage you need, you’re more likely to buy an unnecessary policy. Before you rent, use the 5 steps above to determine what insurance coverage you already have. From there, you can make a better decision at the counter.