Rental car insurance can add $10 to $30 per day to your bill. These rental car insurance options can turn your budget-friendly car rental into a pricey expense.
The moment of uncertainty hits everyone at the rental counter. The agent waits for an answer while we try to recall our personal insurance coverage details. Questions like “Do I really need this coverage?” and “Am I already protected?” race through our minds.
Understanding rental car insurance coverage is straightforward. Your personal auto insurance policies often provide protection when you rent a car, particularly for rentals in the U.S. or Canada.
In this piece, we’ll explore how insurance works on a rental car and examine different coverage options, from collision damage waivers to personal effects coverage. You’ll learn smart strategies that ensure protection without overpaying. The money you save could enhance your actual vacation!
Do You Actually Need Rental Car Insurance?
The rental counter creates confusion for many travelers who aren’t sure about their insurance needs. A Consumer Reports survey shows that all but one of these members who rented cars avoided buying insurance from the rental agency. This shows most people use their existing coverage – but does this choice always make sense?
How does insurance work on a rental car?
Your personal auto insurance policies usually cover rental cars during personal travel in the U.S. and Canada. The coverage limits and deductibles from your policy apply to your rental. To cite an instance, your rental car gets the same protection if you have collision coverage on your personal vehicle.
Credit cards typically offer secondary coverage that kicks in after your personal auto insurance pays out. You must pay for the rental with that specific card and say no to the rental agency’s offerings to get this benefit. But many credit card policies come with limits and usually don’t cover liability insurance.
When your personal auto insurance is enough
Your personal auto insurance works fine when:
- You have comprehensive and collision coverage on your personal policy
- You’re renting a vehicle of similar value to your own car
- You’re ready to pay your deductible if damage happens
- You’re renting within the U.S. or Canada
- You know what it all means about “loss of use” fees
Even with personal coverage, you might pay some costs yourself. A rental car that needs repairs could stick you with “loss of use” fees that many personal policies skip. A car in repair for two weeks could cost you about $1,200 in uncovered fees at an $86 daily rental rate.
Situations where you must buy rental insurance
Your personal coverage might not be enough in these cases:
- Your personal vehicle only has liability insurance
- The rental car is by a lot nicer or different from your own
- You’re renting outside the U.S. and Canada (most U.S. policies stop at the border)
- You’re getting an RV, cargo van, or moving truck (these are too heavy for standard policies)
- Your employer asks you to rent for business
- The rental goes beyond 15 straight days
People without cars or auto insurance just need to buy coverage from the rental company. This helps avoid huge replacement costs if something goes wrong. Even within the U.S., compliance with state-specific car seat laws can determine how liability is assigned after an accident. Tourists are expected to follow these rules just like residents, and violations could complicate insurance claims.
Understanding the Different Types of Rental Car Insurance
Rental companies provide four different types of car insurance that protect you in unique ways.
Collision Damage Waiver (CDW)
The CDW isn’t technically insurance but a “waiver” that frees you from financial responsibility when your rental car gets damaged or stolen. You’ll pay $10-30 per day for this coverage, with the exact cost based on your vehicle and rental company. Most waivers come with a deductible and might not cover everything, like fees when the car is getting fixed. Remember that CDW won’t help if damage happens from reckless driving, unauthorized drivers, or illegal activities.
Supplemental Liability Insurance (SLI)
SLI shields you from claims when you cause damage or injuries to others in an accident. The coverage goes up to $500,000-$1 million, which is nowhere near the minimum liability limits required by law. You should think over getting SLI if you don’t own a car or plan to drive internationally where your U.S. auto policy doesn’t work.
Personal Accident Insurance (PAI)
PAI takes care of medical costs, ambulance services, and death benefits for you and your passengers after an accident. The benefits can vary: renters get up to $175,000 while passengers receive $25,000, plus $10,000 for medical expenses and $500 daily hospital benefits for 30 days. Your existing health insurance or auto policy’s personal injury protection might already cover these benefits.
Personal Effects Coverage (PEC)
PEC protects your belongings from theft in the rental vehicle. Most policies give you $600 per person up to $1,800 total. In spite of that, PEC has many exclusions – you won’t get coverage for electronics, currency, contact lenses, or items stolen without proof of break-in. Your homeowners or renters insurance might already cover personal items while traveling, which could make this coverage unnecessary.
Ways to Get Rental Car Insurance Coverage
You have several options to get the right rental car coverage, and each comes with its own benefits and limits. Let’s get into your choices so you can stay protected without spending more than needed.
Using your personal auto insurance
Your personal auto insurance policy usually covers rental cars with similar coverage limits and deductibles. So, when your policy has liability, comprehensive, and collision coverage, these protections typically apply to your rental vehicle. You should ask your insurance provider to confirm what your policy covers before depending on this option alone. Remember that your personal coverage might not protect you from “loss of use” fees – charges that apply while the damaged rental car gets repairs – as many policies skip this protection.
Using a credit card with rental coverage
Credit cards often give you rental car insurance as a free benefit. The coverage activates when you pay for the entire rental with that card and say no to the rental company’s collision damage waiver. We used credit card coverage as a backup to personal auto insurance. Some premium cards give you primary coverage, so you won’t need to use your personal insurance at all. Your secondary coverage becomes primary if you don’t have personal auto insurance. Just know that most credit card policies won’t cover certain types of vehicles and limit rental duration to 14-31 days.
Buying from the rental car company
Insurance from the rental counter makes sense in certain cases, especially when you have no personal auto coverage. Rental companies give you options for liability coverage, collision/loss damage waivers, personal accident insurance, and personal effects coverage. These options cost more – up to $19 daily for the simple damage waiver – but they usually skip the deductible that comes with your personal policy.
Third-party rental car insurance providers
Independent insurance companies sell specialized rental car policies that often cost less than rental counter options. To name just one example, see Allianz Global Assistance with collision loss/damage insurance up to $50,000. You need to buy these third-party options before you pick up your rental, and they give you actual insurance instead of waivers. This option works great for international rentals where your U.S. policy might not work.
Smart Tips to Save Money and Stay Protected
Rental car companies often pressure customers to buy expensive add-ons at the counter. You can save money and stay protected with some advance planning.
Avoiding unnecessary add-ons
Your personal auto policy or credit card may already provide coverage, so skip the rental counter insurance. Filling up the tank yourself costs less than prepaying for gas. A smartphone with navigation apps eliminates the need for GPS device rentals. Your spouse or partner might drive free in many states that ban charges for spousal drivers.
Understanding exclusions and fine print
CDW policies won’t cover damage from reckless driving, unauthorized drivers, or DUIs. The policies typically exclude damage to tires, windscreens, mirrors and the undercarriage. Your personal insurance might not cover “loss of use” fees while the rental car gets repaired.
Best practices for international rentals
Most U.S. auto policies cover rentals only in the U.S. and Canada. You should check if your destination requires an International Driver’s Permit. Take photos and document any existing damage before leaving the lot. Travel insurance providers offer damage protection that costs less than the rental company’s collision damage waiver.
How to compare rental car insurance options
Smart travelers research their options before reaching the counter. Third-party providers, such as Allianz, offer collision protection of up to $50,000 for just $11 per day. Annual travel insurance with rental coverage works best for people who travel frequently.
Conclusion
Rental car insurance doesn’t need to feel overwhelming. This piece shows how daily insurance fees can pile up fast and even double your rental costs without good reason. The good news is that your personal auto insurance and credit cards might already provide the coverage you need.
The four main types of rental car insurance serve different purposes. These include Collision Damage Waiver, Supplemental Liability Insurance, Personal Accident Insurance, and Personal Effects Coverage. Your existing policies likely cover many of these already. So taking a few minutes to review your coverage before your trip can save you hundreds at the rental counter.
Some situations make extra protection worth the cost. To name just one example, you might need more coverage if you’re traveling internationally, renting specialty vehicles, or don’t have personal auto insurance. On top of that, it pays to understand policy exclusions and fine print to avoid surprise expenses even with seemingly full coverage.
Note that you’ll feel more confident saying no at the rental counter when you know your coverage options. Call your insurance provider, check your credit card perks, and look at third-party options to find the best protection plan before your next trip.
Smart choices about rental car insurance let you drive away confident and with extra money to spend on the fun parts of your trip!
