When renting a car, you're expected to carry insurance to cover liability in the event of an accident. You can use your own insurance for this, but there is also usually the option of purchasing rental car insurance on-site. There are pros and cons to using either policy type that we will help you understand.
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Do you need insurance to rent a car?
You need auto insurance to legally drive in most states. A car rental company will require you to have insurance coverage of some sort in order to cover your own liability in the event of an accident. Your own car insurance policy, or possibly your credit card, can provide this coverage. However, here are some questions to ask to make sure the coverage you already carry is enough:
- Are you renting the car with a credit card that offers a collision damage waiver?
- Are you comfortable with your car insurance policy's liability limits?
- Does your personal injury protection coverage and/or health insurance provide enough coverage for medical treatment if you or your passengers are injured?
- Are you renting a non-luxury car that has a similar value to your own vehicle?
If you answer "no" to any of these or are not sure, purchasing car rental insurance elsewhere is a practical move.
How does rental car insurance work?
Rental car insurance provides coverage for those who can't or don't want to use their own personal car insurance. You can purchase rental car insurance directly through the rental agency, but you also have the option of purchasing a policy through a third-party insurer online.
Rental car insurance contains the following coverages:
|Coverage||What it pays for||Risk also covered by|
|Collision damage waiver (CDW)||Car damage, as well as the rental company's loss of revenue during repairs.||Some credit cards, as well as the collision and comprehensive coverage from your own car insurance. Your own policy should cover repair costs minus your deductible, but not the company's loss of use.|
|Supplemental liability insurance (SLI)||Injuries or damage to others you're responsible for, including costs that exceed your car insurance policy limits.||Your car insurance policy's liability limits usually cover rental cars. SLI bumps your liability limits, possibly up to $1 million.|
|Personal accident insurance (PAI)||Medical treatment for you and your passengers, plus ambulance costs and death benefits.||Your auto insurance policy's medical payments coverage or personal injury protection.|
|Personal effects coverage||Theft of personal property from your rental car.||Homeowners or renters insurance.|
If you're not sure if you have any of these coverage points, they'll be on the declaration page of your car or home insurance. You can also contact your provider for any clarification on your coverage.
Credit cards and car rental insurance
Many credit card companies offer collision coverage or loss damage waiver protections if you use their card to pay for the car rental. These coverages are usually only valid if you are the driver.
Collision damage waivers offered by Visa and Mastercard usually only qualify for car rentals that last 15 days or less. Coverage from credit cards often covers vehicle repair and the rental company's loss of use during the repair.
How much is rental car insurance?
Rental car insurance prices vary by rental company and location. When purchasing a policy, be aware that you could pay upwards of 60% more for insurance at the airport for the cost of a rental, before taxes and fees. Unless you're in a hurry, doing a quick look online for coverage can save you a considerable amount of money.
Keep in mind that rental coverage from your credit card is limited. It only covers the rental vehicle. You will need liability coverage for damages and injuries you cause others, and medical payments coverage for your own injuries or injuries to your passengers.
Is rental car insurance worth it?
Rental car insurance can be worthwhile if your own insurance isn't an option, or if you don't have coverage available through a credit card. Also, if you're renting outside the U.S. or Canada, your own car insurance policy probably won't work. Your credit card coverage, on the other hand, may work for international coverage. Following are some other good reasons why rental car insurance may be a good choice for you:
Collision damage waiver
A CDL can save you a significant amount of money if you get into an accident while renting a car. Even with the collision and comprehensive coverage of a full-coverage policy, you still wind up having to pay your deductible and loss of revenue to the rental company.
A collision damage waiver is also a good idea if you're renting a luxury car, or any vehicle that's worth more than your own. The coverage limits of your personal car insurance policy are based on the replacement of your own vehicle. If you rent a car valued higher than your own, your policy limits will probably not be sufficient in the event of a totaled car.
Supplemental liability insurance
Supplemental liability insurance covers you if you are responsible for injuries or property damage to others and don't have your own car insurance policy, or if you have a policy with insufficient liability limits. SLI covers claims related to these injuries or damage, even if a claim exceeds your personal policy limits.
Personal accident insurance
Personal accident insurance covers medical treatment for you and any passengers if your car insurance doesn't include medical payment coverage or personal injury protection. While PAI will usually only cost you $10 a day or less, health insurance can cost you more after deductibles and copayments.
Another key reason to consider personal accident insurance is scope of coverage. A personal health insurance policy only covers you and your family. Injured passengers not related to you would not be covered by it.
For as low as $5 a day, most car rental companies offer roadside assistance. If you have AAA, or roadside assistance through a credit car or other perk provider, this becomes redundant. Otherwise, it's worth considering.
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