Your 411 on Rental Car Insurance

By Amy Curtis

Is car rental insurance a myth, or do you really need it?

Your 411 on Rental Car Insurance

Whether you’re traveling on business, you’re on vacation or your car is in the shop, you probably have the same question when you’re standing at the rental car counter. Do you take the insurance or sign the collision damage waiver? The answer depends on a variety of factors.

Is rental car insurance worth it?

Adding the rental company’s insurance can tack another $15-$30 per day to your rental car agreement. That quickly adds up, and it may not even be necessary. Often, your personal car insurance will cover any damage to a rental. If that’s not the case, but you rent with a credit card, your card may cover the risk.

Before you rent a car, do your homework. Check your insurance policy to make sure it extends to rental cars, and look into your credit card’s policies, to see if you’re covered there. Sometimes you’ll find exclusions for travel into certain countries, or for particular makes and models of cars, so it’s important to know what’s really covered. Note that if you want your credit card’s insurance to cover the car, you’ll have to pay for the entire rental with that card.

Tip

Your insurance policy may not cover a rental car that’s a business expense. However, your employer’s insurance may cover you. Check before you rent to determine employer policy regarding rental car insurance.

If you have neither your own car insurance or a credit card-related insurance – i.e. no way to cover a loss on the car yourself – you should purchase the rental agency's insurance.

Do you have to have insurance to rent a car?

Obviously, you’ll need to be protected if anything should happen to the rental car. Many renters, however, don’t carry personal auto insurance, because they don’t own or lease an automobile. When this is the case, the credit card’s insurance can often pick up the slack, but you must decline the rental company’s insurance for your card to cover you.

If you do have your own insurance, it’s still important to learn what it covers before deciding what to do about the rental car insurance. You must have collision and comprehensive insurance, and it must extend to the car you are planning to rent.

What is secondary insurance?

Secondary insurance is designed to cover gaps you may have in coverage. Some credit cards offer primary insurance, others offer only secondary. However, if there’s no other coverage, that lack of coverage becomes the gap, and the secondary insurance essentially becomes primary insurance. For that to happen, though you’ll need to make sure there’s no other coverage in place, which means signing the rental company’s collision damage waiver and declining its coverage.

Knowledge is power

Researching ahead of time to find out exactly which insurance is necessary can give you confidence to stand up to any bullying or scare tactics employed by the rental car company. An agent may suggest that the insurance offered by the rental company is mandatory, or may make other claims to coerce you to purchase the insurance. You may even be asked to provide proof of your insurance, and told you can't rent the car without it, unless you purchase the additional coverage the agency offers. All of these claims are false, and if you've confirmed this with your insurance or credit card company ahead of time, you'll be able to say so with surety.

Warning

Even though you’re protected against damage to the rental car, your credit card’s insurance may not cover things like personal injury, personal liability and damage to other vehicles. Contact your credit card company before you rent the car, to make sure you understand what’s covered and what’s not.