If you fail to check with your personal auto insurance carrier before you buy rental car insurance, you may end up spending money on duplicate coverage you really don't need.
Consumers often purchase unneeded policies, says Will Montgomery, the principal of Montgomery & Associates LLC, an insurance agency in Brentwood, Tenn. Why? “Because they’re overly cautious”, Montgomery says.
But if you’ve already purchased liability, comprehensive and collision coverage from your insurer, buying more coverage from a rental agency may be a waste of money.
What rental car insurance does your credit card cover?
While credit cards often offer some collision and theft protection for rental cars, these benefits typically are secondary to your personal auto policy or the insurance you buy from a rental company, says Karl Newman, president of the Seattle-based Northwest Insurance Council, a nonprofit trade association.
They generally don't include liability coverage, he adds. This means the credit card company will only pay claims after other insurance coverage has been exhausted.
In most cases, you must pay for the rental car with a credit card, in order to get that credit card company's protection. If this supplemental coverage is available to you, using it is a good idea, since it increases your insurance protection in the event of a serious and costly accident.
The credit cards you use may provide rental car insurance coverage only in certain countries. When traveling outside U.S., call the number on the back of your credit card to find out which countries are included.
Find out the maximum number of days you’re covered through your credit card and whether there are any restrictions on the models of car you can rent.
What types of rental insurance do car rental companies offer?
Car rental companies typically offer the following products:
- Collision damage waivers (CDWs) relieve renters of responsibility if their rental car is damaged or stolen. If you already have comprehensive and collision coverage on your own car, you don't need to buy this protection, says Jay Gandee, owner of the Jay Gandee Agency of American Family Insurance in Phoenix.
- According to the NAIC, this coverage can cost $10 to $20 per day.
- Comprehensive insurance covers car damage caused by accidents other than collisions, such as fire, theft, wind, hail, vandalism or striking an animal. Collision covers the cost of repairing or replacing your vehicle following a car accident.
- New Jersey insurance agent Kevin Foley likes CDWs because of the convenience and extra protection they offer.
- For example, if you damage a rental car and have a CDW, there’s no need to file a claim through your personal auto policy or your credit card company. Filing a claim through your personal auto policy can lead to higher premiums.
- A CDW also covers the loss of value that rental cars suffer following accidents, Foley says. If you didn’t have this waiver, you’d have to pay for this cost out of pocket.
- Liability insurance covers medical expenses and property damage you may cause to other persons. It also pays for your legal defense, should you end up in court. If you're adequately insured for your own vehicle, you can skip this. If not, this coverage can be beneficial. The NAIC says this insurance typically costs $7 to $14 a day.
- Personal accident coverage compensates you and your passengers for medical bills that result from a car accident. If you have adequate health and disability income insurance, or are covered by a personal injury protection policy, you probably don't need this coverage, Gandee says.
- If you lack these coverages, this policy will provide that protection. Such coverage typically costs between $1 and $5 per day, the NAIC says.
- Personal effects coverage protects you against the theft of personal items from inside your rental car. If you have a homeowners or renters insurance policy, you probably already have this coverage, Gandee says.
- If you lack these coverages, this policy will provide protection while you are renting the car. This coverage typically costs $2 to $5 a day, according to the NAIC.
Renting in foreign countries
Most U.S. auto carriers won't insure a vehicle outside the U.S. and Canada. That means your U.S. auto coverage won't follow you to foreign nations, other than Canada.
There are several differences between renting a car in the U.S. and in foreign countries, Gandee says.
For example, if you're planning to drive in a country that requires an international driver's permit (IDP), you'll have to obtain one in the U.S. If you arrive at your foreign destination without one, you won't be able to rent a vehicle.
According to the U.S. Department of State, you can obtain an IDP from two U.S. auto clubs: AAA and the National Auto Club. To get an IDP, you’ll need a valid U.S. driver’s license and two passport-type photos.
Rental car companies in foreign countries typically allow you to refuse the insurance policies they sell only if you bring proof of alternate coverage, Gandee says. You should make sure the type of car you rent isn't excluded from your policy's coverage, he adds.
For example, some policies may exclude luxury cars or SUVs because they cost more to repair or replace.