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UPDATED: Mar 19, 2020
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Whether for business or pleasure, thousands of cars are rented at airports and other locations every year. If you’re one of the people planning to rent a car, for whatever reason, you should know about rental car insurance.
Just as your personal cars need insurance, you need to have some sort of car insurance to cover your rental car.
But does that mean you always need to take the car insurance offered by the rental agency? Or does your personal car insurance cover it? If you’re traveling for business, does your company cover the insurance on the rental car?
Rental Car Insurance Guide
So what exactly is rental car insurance? When you rent a car from any rental company, no matter where it is located, they are going to want to protect their investment.
Not only is it illegal to drive a rental without the state-required insurance, the company is going to want to make sure it can recover the costs of any damage to their merchandise.
You will be offered several different types of insurance that you can buy for the duration of your rental:
- Collision Damage Waiver — This is the one the rental company is most concerned with, and the most expensive, costing as much as $19 a day, says MSNBC. When you pay for this waiver, the rental company will take responsibility for any damages done to the rental rather than holding you responsible.
- Liability Insurance — This is actually insurance, and does what all liability insurance does. This policy covers any damages done to another vehicle if you are at-fault in an accident while driving the rental car. It also covers the medical bills and lost wages.
- Personal Accident Insurance — This policy will cover your medical expenses stemming from an accident. It is the same as PIP or medical payments on personal car insurance.
- Personal Effects Coverage — This policy covers any personal items stolen from the car.
Car rental insurance can easily amount to more than $40 a day for all of these, depending on the levels of coverage you get. This can be more than the cost to rent a small car!
However, with some careful planning and a few phone calls, you can save yourself a lot of money.
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Personal Auto Insurance
Your personal car insurance policy will cover you when you drive a rental car most of the time. However, before renting a car, always call and check with your insurance company to be sure.
If you have a super-low-rate policy that just covers the basics, enough to keep you driving legally in your state, then you might not be covered. It’s always better to find out before you rent a car what your policy covers.
The level of coverage you have on your personal car is what you’ll have on the rental.
For example, if you carry only liability because you drive an older car that is paid off, then your personal auto insurance will only provide liability coverage for the rental.
If this is the case, you should probably consider getting the collision coverage that the rental company offers.
Also, remember that you’ll still have to pay any deductible that you have on your personal cars. If you do have comp and collision on your car at home, with a $500 deductible, you’ll be liable for the first $500 in damage if you have an accident in the rental.
Check with your homeowner’s insurance to see if your personal items are covered in a rental car.
Many times your homeowner’s insurance already covers this. Or it can be added for just a few dollars a year.
If you reserve and pay for your rental car with certain credit cards, you might not have to pay a deductible. Credit cards offer various perks, one of which is often rental car insurance. This is only valid if you actually use that particular credit card for the rental.
Credit card rental insurance is a secondary insurance. In other words, it pays for what your personal auto insurance does not. If you have that $500 deductible, then your credit card insurance will pay that for you.
It’s a great dual coverage, allowing many people to refuse the expensive rental insurance. In fact, if you want to utilize your credit card’s policy, you have to waive the rental company’s insurance or the credit card won’t pay anything.
Sometimes a credit card will pay for collision coverage if you only have liability through your personal auto insurance.
Again, always check with the credit card issuer to be sure.
As USA Today reports, there are restrictions on the credit card policy you need to be aware of. Some companies won’t cover the rental if:
- You are on a business trip
- You rent certain types of vehicles, like a sports car or an SUV
- You are in a foreign country
- It is a long-term rental, usually more than 15 days
Also be aware of the time limit to report any accidents. Some credit cards won’t pay for damages if you wait too long to report the accident; anywhere from 30 to 45 days after the incident.
So before you book your next car rental, call both your personal auto insurance company and the credit card issuer to find out exactly what they cover and what the limitations are.
Most of the time this combination allows you to save a lot of money at the rental counter, but always know beforehand so you aren’t caught off-guard by the rental company’s pressure tactics.
Spending a few minutes before your trip can save you a lot of money later.
If you are traveling for business, your personal car insurance and personal credit card usually will not cover the rental.
Before leaving on your trip, ask your supervisor how they want you to handle the insurance aspect.
Larger companies often purchase a company-wide policy that covers their employees who rent cars for business purposes. S
Since this varies widely from company to company, find out the details from your appropriate company representative before leaving home.
For Drivers Who Don’t Own a Car
What if you don’t own a car? There are many people who live in cities with public transit systems who don’t even own a personal car. What do people like this need to do when they travel?
Since you don’t own a car, you probably don’t have personal auto insurance. This means that even if your credit card offers this perk, it won’t do you any good since it only works in conjunction with car insurance.
If you don’t have car insurance, you’re probably better off just getting the insurance from the rental company.
However, if you rent a car frequently, look into non-owner liability car insurance. This type of policy, offered by many car insurance companies, covers you if you rent or borrow a vehicle.
It is very inexpensive insurance, often as low as $200 or $300 a year. If you spend $30 to $45 a day for rental insurance from the rental company, a frequent renter could easily spend more than $300 a year.
This type of policy also allows you to be eligible for your credit card perk, as this acts as your primary auto insurance.
When to Buy Insurance at the Rental Counter
If you have done your homework before you rent, you should have a good idea of what coverage you already have. You also know exactly what the rental company will offer you.
If you have car insurance that will cover a rental plus a credit card that will act as a secondary policy, feel free to waive the insurance when you pick up your car and enjoy all the money you are saving.
If your personal insurance will cover liability, but not collision, and your credit card won’t cover rentals, then buy the collision damage waiver only.
If you don’t have PIP or medical payments on your personal insurance, you might want to consider getting the personal accident insurance.
However, if you have health insurance, it will probably cover this as well, so you still might not need it. If you are away on business, then follow your company’s instructions.
For more tips on dealing with rental car companies, read Consumer Reports’ article on rental cars. FREE car insurance quotes are available now! Enter your zip code below to get started!