What does car rental insurance cover

This can be a confusing situation, and the car rental agency may try to persuade you to purchase their insurance policy. The truth is, your own auto policy may already cover your rental.

Buying supplemental insurance from the rental company— can add approximately $15 to $30 per day to the cost of the rental.1 However, if you already have an insurance policy on your own car, you may be covered in your rental vehicle.

Before you sign any paperwork at the rental office, call your auto insurance agent and ask if your car insurance covers your rental car. If you don’t have liability, comprehensive and collision coverage on your own car, then your insurance likely will not cover your rental car if you get into a collision or damage the rented vehicle.2

Another important thing to keep in mind when figuring out whether or not your auto insurance covers your car rental is the purpose of the trip. If your personal auto insurance doesn't cover business use, you may not be covered by your policy if you rent a car for a business trip.

Always double-check your personal auto insurance policy to make sure that you have sufficient coverage before accepting or declining insurance at the rental office.

Any coverage that you have normally through your auto insurance policy will typically transfer to the car that you’re renting. The following are some kinds of coverage your rental company will offer you in lieu of your standard insurance.

Liability coverage protects you if your rental vehicle is in an accident that causes bodily harm to other individuals or damage to property. Your liability insurance from your auto policy will most likely cover this already.

A collision/loss damage waiver relieves you of financial responsibility for damages caused to your rental vehicle. Your collision and comprehensive coverage will usually cover this already, however a more expensive rental car may require you to purchase additional coverage to ensure the cash value of the vehicle is covered.

Personal effects coverage protects you if any of your belongings are stolen from your rental vehicle, however renters or homeowners insurance typically covers you in these cases.

Personal accident coverage protects you from any medical fees caused by an accident. If you have personal injury protection through your auto insurance, you can decline this additional coverage from the rental company.3

In addition to coverage from your auto insurance policy, your credit card company might provide insurance coverage if you use its card to pay for the rental. However, it's important to check with the company before you rent to understand exactly what kind of coverage you may or may not have. In some cases, it might only be collision insurance, which can help pay for any property damage but not cover any costs arising from injuries that occurred in the collision.4

Also, be aware that different credit card companies have different rules and restrictions when it comes to what they cover. Certain models such as sports cars or exotic vehicles are often excluded, and what's covered can vary from one credit card provider to the next. Some don't cover incidents that take place on dirt or gravel roads, while other cards don’t cover damage to wheels and rims.5

Knowing whether or not your auto insurance covers your rental car isn't a simple yes-or-no answer. Because there are many different factors to consider, always contact your auto insurance agent before going on a trip. Review your policy and determine what you might need.

1 “Why you don’t need to buy extra car rental insurance,” Money, https://money.cnn.com/2014/06/30/pf/insurance/rental-car-insurance/index.html, June 30, 2014.

4 “When to Buy Car Rental Insurance,” DMV.org, https://www.dmv.org/insurance/when-to-buy-rental-car-insurance.php, Downloaded April 17, 2018.

5 “Why you don’t need to buy extra car rental insurance,” Money, https://money.cnn.com/2014/06/30/pf/insurance/rental-car-insurance/index.html, June 30, 2014.

Here it comes across the counter: the contract you have to sign to get your rental car. The salesperson is pushing you hard to buy rental car insurance as your pen hovers over the paper. Collision damage waiver? Personal accident insurance? Do you need all this stuff? What does it even mean?

Don't check any boxes yet! Whatever the salesperson might say, these coverages are optional — and if you get them all, they can add up to $30 per day to the rental bill.i You want to be protected, but there's no sense in paying extra for coverage you already have. We'll explain the different types of rental car insurance and tell you what you really need.

What's the Collision Damage Waiver?

The collision damage waiver or loss damage waiver offered by the rental car company means that if your rental car is damaged or stolen, you don’t have to pay to repair or replace it. These waivers typically include a deductible, however.

Do you need a collision damage waiver?

It’s wise to purchase this type of rental car insurance. While your regular car insurance policy may include collision coverage for rental cars, it most likely includes a deductible and may not pay for all the rental car company's charges, such as loss of use (charges for the money the company's losing while its car is in the shop).ii Your credit card may include free collision damage coverage, but credit card rental car insurance is typically secondary coverage, meaning any claims will go first to your auto insurance company.

The most affordable way to ensure adequate protection in case of collision or theft is with third-party rental car insurance. The Rental Car Damage Protector from Allianz Global Assistance provides affordable collision loss/damage insurance coverage up to $75,000.

Unlike the waivers rental car agencies sell, the Rental Car Damage Protector is actual insurance that can protect your rental car almost anywhere in the world.

What Is Supplemental Liability Insurance? 

Liability insurance typically covers damages to other people's property (e.g. their cars) as well as medical costs for other people’s injuries in an accident you're legally responsible for.iii In the U.S., every state requires a minimum amount of liability insurance on car insurance policies, so you may already have liability coverage through your personal auto insurance.

Do You Need Supplemental Liability Insurance? 

Someone trying to sell you rental car insurance may say your liability coverage is too low and encourage you to buy supplemental insurance. If you're worried about liability, there's a better way to protect yourself. The Insurance Institute of America suggests buying "umbrella liability insurance," a low-cost policy added to your auto and homeowners (or renters) insurance that can provide extra protection while driving your car or a rental.iv

U.S. auto insurance policies often don’t provide any coverage abroad, so you may want to — or you’ll be required to — purchase liability insurance when you’re traveling overseas.

What Is Personal Accident Insurance?

While liability coverage covers other people's property damage and injuries in an accident, personal accident coverage includes medical, ambulance and death benefits for you (the rental car driver) and your passengers.

Do You Need Personal Accident Insurance?

Probably not. According to Consumer Affairs, the benefits provided by personal accident insurance may already be included in your health, life or car insurance policies — or they may be included in the coverage the car rental company provides. If you’re traveling overseas, where U.S. health insurance may not be accepted, then you should carry travel insurance with emergency medical benefits and emergency transportation benefits. These benefits are broader than personal accident insurance, because they can cover your medical expenses in an emergency overseas, whether or not it was caused by a car accident.

What is Personal Effects Coverage?

Personal effects coverage covers the theft of possessions from the rental car, up to a set dollar limit.

Do You Need Personal Effects Coverage?

Probably not. If you have a homeowners or renters insurance policy, you may also be covered for loss of personal items stolen from your car.v Check your policy documents to be sure. And if you have travel insurance with baggage loss/damage benefits, you may be protected if your baggage is lost, damaged or stolen while you’re traveling.

If you’re a frequent traveler, an annual travel insurance plan may be your best bet to protect your rental car, your baggage and your finances. The AllTrips Premier Plan, for instance, includes the rental car collision damage waiver, $2,000 in baggage loss/damage benefits, and a slew of other travel insurance benefits that cover you for a 365-day period.

The easiest way to figure out what rental car insurance you need? Do your research before you're standing at the rental car counter. Check your car insurance coverage and your credit card coverage options. Buy low-cost collision loss/damage insurance ahead of time. And if you impulsively check "yes" on all the insurance options offered by the rental car company, don't let buyer's remorse ruin your vacation (and your budget). The company may let you cancel the coverage if you return to one of its offices the next day.vi

There are four main rental car insurance options that you could be offered through your rental agency: a loss damage waiver, liability coverage, personal accident insurance and personal effects coverage.

Below are the different types of car rental insurance:

Rental Car Liability Insurance

Rental car companies also sell liability car insurance. This covers other drivers’ property damage and injuries resulting from an accident you cause. If you have personal liability insurance, your own policy will provide this coverage (as long as the trip isn’t for business). But if you know you’re going to be cruising in Miami alongside Lamborghinis and Ferraris, $10,000 in liability coverage probably isn’t going to cut it, so you may want to up your policy limits.

If you are a frequent traveler but don’t own a car, you can also get non-owners car insurance to cover you in all driving situations.

Rental Car Loss-damage Waiver Insurance

This option waives your responsibility to pay for a total loss, accident damage, environmental damage, theft and vandalism. A collision damage waiver (CDW) is similar, but it doesn’t protect against theft. These waivers basically act like comprehensive and collision policies for the rental. If you already have comprehensive and collision insurance, you probably don’t need this.

However, a loss damage waiver will not require you to pay a deductible, which is another thing to consider.

If you cause damage to your vehicle and it gets sent to the repair shop, the rental car company can charge you fees for each day the car is out of commission. The loss damage waiver will protect you from these fees, as will most full coverage insurance policies. However, some will not, so it’s a good idea to look into your own policy before you rent a car.

Personal Accident Car Rental Insurance

This type of coverage pays for medical bills for you and your passengers, regardless of who is at fault for an accident. It’s similar to medical payments (MedPay) and personal injury protection (PIP) that you’d get on your standard vehicle.

If you already have either of these insurance products, you do not need personal accident insurance. Additionally, if your personal car insurance doesn’t cover your medical costs, your health insurance can cover them after you pay your health deductible. Personal accident insurance doesn’t require a deductible.

Rental Car Personal Effects Coverage

This additional coverage option protects your personal items like electronics, luggage and clothing. If you have a homeowners or renters insurance policy, it will cover personal items stolen from a rental car as well.

Other Types Of Car Rental Insurance

Besides options from the rental car company, you might be covered through your credit card company or travel insurance plan.

Credit Card Rental Car Insurance

Premium credit cards often include primary coverage for rental cars. Primary coverage comes with high limits and can handle the entire claim, which means your own insurance company won’t know about the claim (and won’t raise your rates).

On the other hand, standard cards often include secondary coverage. This comes with lower limits and requires you to file a claim with your own insurance company first. In either case, you have to book the rental with the credit card to qualify for coverage.

Car Rental Travel Insurance

Travel insurance programs can typically cover collision and loss of use at a cheaper price than the rental car company as well.

International Car Rental Insurance

If you travel to Mexico or Canada, your personal insurance may or may not cover rental cars in those locations. It’s a good idea to speak to your agent to find out before you go. Generally, standard auto insurance companies in the U.S. don’t cover rentals abroad, so it may be wise to purchase rental car insurance in that situation.