Rental Car Insurance: Your Coverage Options

Renting a car can be an integral part of any travel plans. The industry has continued to grow over the last several years as more people recognize the benefits of borrowing a vehicle instead of using their own.

Rental cars are often more cost-effective for travelers and offer far more convenience, but the process can be confusing when it comes to rental car insurance coverage. Everyone who has rented a car in the past knows the question from the salesperson about adding rental car insurance is coming. Some may opt in for a few extra dollars per day, while others vehemently opt out.

To make sure you’re covered in a rental car, and not wasting money doing so, here’s what you need to know about your options for rental car insurance coverage.

• Understanding Your Own Insurance Coverage
• Types of Car Insurance Offered By Rental Car Companies
• Traps to Avoid
• Your Credit Card’s Rental Car Coverage

Understanding Your Own Insurance Coverage

Before saying yes or no to rental car insurance, take a moment to understand what coverage you already have in place. Most car renters look to their own car insurance policies to analyze the following:

• How much coverage is on your current vehicle – the amount of insurance on your personal vehicle often transfers to a rental car, so long as you’re using it for personal needs, not business needs. Your deductible also applies, so keep that in mind.
• ​Collision or comprehensive coverage – when you have collision or comprehensive coverage through your own car insurance policy, it will likely extend to a rental car as well. This protects you from theft or damage to the car while it is in your possession.
• Ancillary fees coverage – some car insurance policies also provide coverage for administrative fees, loss of use of the vehicle, or towing costs. These would also generally extend to a rental car agreement.

These are all common options you may already have as part of your personal auto insurance policy, meaning there is no need to add on coverage through rental car insurance at the counter. Many individuals also have homeowners insurance coverage or renters insurance which offers protection against theft or damage to personal belongings. To be safe, always check with the insurance company for your auto, homeowners, or renters coverage to understand what is covered and if it would extend to a rental car under your name.

Rental Car Insurance Types

Even when you have coverage in place, the salesperson finalizing your rental car contract can provide more options to choose from before you drive off the lot. Many car rental insurance options are similar to what your own policy provides. If you already have the same coverage, you can safely opt-out and save some cash. If you are not covered, you might consider adding a rental car insurance policy for added protection. Here are the four most common types of coverage options available through rental car companies.

Loss-Damage Waiver

Also known as collision damage waiver, this car rental insurance option is the most common among rental car companies. The coverage waives any financial responsibility should the rental car be damaged or stolen, as well as loss-of-use charges because a rental car is in a repair shop, towed, or otherwise out of commission. Opting into this coverage takes away the car rental company’s ability to come after the driver of the rental for these fees. In most cases, the cost usually ranges from an additional $9 to $19 per day.

Liability Coverage

Most states require drivers to have liability coverage through their car insurance companies, meeting minimum standards to help protect against lawsuits related to vehicle damage or theft. Liability coverage offered through a car rental insurance option typically ranges from $7 to $14 per day.

Personal Accident Insurance

Car rental insurance may also provide for personal accident coverage. This is simply an add-on policy that offers financial protection against medical costs when an accident takes place. The cost normally ranges from $1 to $5 per day.

Personal Effects Coverage

Car renters also have the option to select personal effects coverage. This type of insurance protects items kept in the rental car, and it can cost between $1 and $4 per day.

Rental Car Insurance Traps to Avoid

Rental car salespeople are trained fairly well at getting drivers to opt-in to additional coverage before they leave the lot. It can be easy to check whatever box they ask you to after a long flight or an exhausting day of travel. The cost of doing so, however, can be significant, especially when you do not pay close attention to the “extra” coverage you are getting.

If you opted-in to all the insurance coverage options listed above, you could be paying an additional $20 per day for your rental car. The majority of this coverage is available through the car insurance, homeowners insurance, or renters insurance you already have, making opting in a waste of time and money.

The only reason to accept the rental car insurance coverage is if you do not currently have auto insurance, or if you already know your coverage does not extend to rental car agreements. In these rare cases, select the most important coverage, like the collision damage waiver, if you are concerned about added costs, and avoid the options that may be covered elsewhere. Do not get trapped into an added cost of car rental insurance when it truly is not necessary.

Your Credit Card’s Rental Car Coverage

There is one other option for saving money on car rental insurance costs at the rental company – using your credit card’s rental car coverage. Several credit card issuers offer free collision coverage for car rentals, so long as the credit card was used to secure the rental in the first place. The card issuers may specifically state it covers physical damage and theft of a covered rental car, as well as loss-of-use charges assessed by the rental car company.

It is important to note that standard credit cards offer this coverage as secondary. This means it will lend a financial hand when your own insurance coverage does not cover all associated costs. However, there are a handful of luxury credit cards that offer primary coverage for collisions, meaning they take on the full cost should something happen.

Bottom Line

Car rental insurance might seem like a safe bet when renting a vehicle, but often it is more cost than benefit. Many insurance companies offer this coverage through individual car, homeowners, or renters policies, and it extends to rental car agreements each and every time.

Alternatively, credit card issuers offer rental car collision coverage when the rental was purchased with the credit card. Recognizing that you may already have coverage from another source is beneficial in avoiding traps of rental car insurance when you’re ready to hit the open road.