It’s a simple question that can fill a rental car customer with uncertainty. “Would you like to purchase insurance for the car?” Buying coverage when you reserve a rental car or pick it up can be costly, but there are times when it’s worth the price. Read on for the information you need to decide on rental car insurance with confidence.
In this article:
Do I need rental car coverage?
If you are involved in an accident in a rental car, the most significant costs insurance can cover include vehicle repairs, your liability for injury or damage to others, and medical treatment for you and your passengers.
However, your personal car insurance policy or your credit card might already provide coverage for one or more of these. If you can say yes to all of the following questions, you probably don’t need rental car insurance.
- Are you paying with a credit card that offers a collision damage waiver
- Are you comfortable with the liability limits on your personal car insurance policy?
- Would your personal car insurance and/or health insurance provide enough coverage for medical treatment for you or your passengers if any of you are hurt in an accident?
- Are you renting a non-luxury or non-exotic car of comparable value to your own vehicle(s)?
If the answer for any of these is “no” or “not sure,” it makes sense to consider purchasing one or more of the optional coverages, from either the rental car company or a reputable third-party insurance company.
How does rental car insurance work?
The insurance that rental car companies offer provides coverage for those who don’t have car insurance and supplements the coverage of those who do. If you are renting a car outside of the U.S. or Canada, your existing car insurance probably won’t cover the rental, but your credit card might.
The rental car company can’t make you buy the coverages it offers, shown below. And you can also shop for these coverages online from companies not affiliated with the rental car company.
|Coverage||What it pays for||These risks are also covered by|
|Collision damage waiver (CDW)||Damage to the car, plus revenue the rental car company loses during repairs.||Certain credit cards. If you have collision and comprehensive coverage in your personal car insurance, these usually cover repair costs, after you pay the deductible, but not loss of use.|
|Supplemental liability insurance (SLI)||Injuries and damage to others in an accident you cause, including costs exceeding your own policy’s limits.||The liability coverage in your own car insurance usually extends to rental cars. SLI bumps your liability limits up to a stated amount, sometimes up to $1 million.|
|Personal accident insurance (PAI)||Medical treatment for you and your passengers, plus ambulance costs and a death benefit.||Your auto policy, if you have medical payments coverage or personal injury protection. Personal health insurance also covers medical treatment, with deductibles and copayments.|
|Personal effects coverage, often paired with PAI||Theft of personal belongings from the vehicle.||Theft of personal property from a vehicle is usually also covered by homeowners or renters insurance.|
If you can’t remember the coverages you have on your personal car insurance policy, you’ll find them on your declaration page, which itemizes your coverages, policy limits and deductibles. Or just contact your agent or carrier.
Similarly, you can check on your credit card’s service agreement to see if it offers a collision damage waiver for rental cars, but it’s usually easier to contact the issuer’s customer service department.
How much does rental car insurance cost?
The rates on rental car insurance vary by company and location. A quick online check of rentals from Los Angeles International Airport and Orlando International Airport revealed the following average rates from three major rental car companies:
- Collision/loss damage waiver: $26 a day, or 30% of the vehicle’s average base rate ($86.55 a day).
- Supplemental liability: $12 a day, or 14% of the base rate.
- Personal accident/personal effects (combined): $8 a day, or 9% of the base rate.
In these two locations, purchasing insurance from the rental car company could add 40% to 60% to the cost of the rental, before taxes and fees.
Will credit card rental car insurance cover me?
Credit cards often come with a collision or loss damage waiver when you use the card to pay for your own rental. This coverage usually does not apply to cars you rent for someone else.
The collision damage waivers offered by Visa and Mastercard usually apply to vehicles rented for 15 days or less. If you don’t have personal car insurance, the credit card covers the costs of repairing the vehicle, plus loss-of-use charges from the rental car company. If your personal insurance policy includes collision and comprehensive coverage, the credit card will cover your deductible and loss-of-use fees, while your personal car insurer usually covers the rest.
It’s important to note that the coverage you get from your credit card, when available, only covers the vehicle. You still need to think about liability and medical payments coverage, if your personal car insurance policy does not already include these.
When is rental car insurance worth it?
Here are the most common reasons to consider the following rental car coverages.
Collision damage waiver
If your credit card does not already offer this coverage, the collision damage waiver could save you hundreds, if not thousands of dollars. Even if your personal policy has collision and comprehensive coverage, you would still have to pay your deductible and lost revenue fees for any damage you cause.
You should also consider a collision damage waiver when you rent an exotic or luxury car, or any vehicle with a higher value than your own. Mastercard’s collision damage waiver typically excludes vehicles that retail for more than $50,000. Visa typically excludes luxury makes, including Aston Martin, Porsche and many Mercedes-Benz and BMW models. And some insurance companies won’t cover collision and comprehensive costs that exceed the value of your own vehicle.
Supplemental liability insurance
If you cause an accident and don’t have a personal car insurance policy, or have one with low liability limits, supplemental liability would protect you from claims, including those exceeding your personal insurance policy’s liability limits.
Personal accident insurance
If your personal auto policy doesn’t include medical payments coverage or personal injury protection, personal accident insurance will cover medical treatment for you and your passengers. Health insurance usually covers medical expenses for you and your family, but deductibles and copayments can add up quickly. Personal accident insurance often only adds $10 a day or less to the rental.
Most car rental companies also offer roadside assistance coverage, often for an additional $5 to $10 a day. Even though rental cars are usually in good shape, anyone can forget to turn off a dome light or have a tire blow out. If you already have roadside assistance through AAA, your credit card or your cell phone provider, you probably won’t need this. Otherwise, it’s a judgement call.
When else should I get rental car insurance?
Personal car insurance usually doesn’t apply to vehicles rented outside of the U.S. or Canada, but the coverage offered by credit cards extends to many other countries. Check with your credit card provider to make sure it does not exclude coverage in the country you are visiting.
Since your personal policy’s liability and medical payments coverage probably won’t apply to rentals outside the U.S. and Canada, consider adding these when renting overseas. Health insurance plans often also include limits or exclusions in other countries.
The insurance rules for car-sharing programs, such as those that allow you to rent a private vehicle, are different from those for traditional rental car companies. It’s best to check on details with the car-sharing provider and your insurance carrier.
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