You’re tired from a long flight. Your back and shoulders ache from hauling your luggage through a busy airport. Your nerves are frayed from a full day of travel. You finally arrive at the car rental counter, just wanting to get into a vehicle and get on with your vacation. That’s when you’re hit with the question:
“Would you like to include our recommended liability insurance, collision damage waiver, personal effects coverage, and personal accident insurance as part of your rental?”
In preparing for this much needed trip, insurance seemed like the furthest thing from your mind. But here you are, unsure of what coverages you really need, and feeling slightly pressured to add possibly hundreds of dollars to your rental costs. What to do?
Does Car Insurance Cover Rental Cars?
If you have a personal auto insurance policy, and you’re traveling in the U.S. or Canada, your coverages likely extend to the rental car. It’s always a good idea to check with your insurance agent or company to make sure, but you probably don’t need the insurance offered at the rental counter.
However, let’s take a look at what that rental car agent is offering you, so you can be a more informed traveler.
Liability
If you cause an accident while driving, liability insurance will reimburse other involved drivers, and their passengers, for the treatment of any injuries and the cost to repair their vehicles.
If you have a personal auto insurance policy, then you have liability insurance, and the coverage likely extends to the rental situation. Your coverage limits (the maximum dollar amount your insurer will pay) apply.
Collision damage waiver (CDW)
A CDW relieves you from any financial responsibility if the rental car is damaged or stolen while in your possession. In other words, you won’t need to pay to repair or replace your rental vehicle. Note that this is sometimes referred to as a loss damage waiver (LDW).
If your personal auto insurance policy includes comprehensive and collision coverage, then it probably extends to the rental, so your insurer will pay for the repair. Note that your deductibles will apply, so you’ll still be on the hook for that amount.
Personal effects coverage
This reimburses you if any of your personal items are stolen from the rental car.
In this case, your homeowners or renters policy may come to the rescue. These policies have insurance for personal property, including what’s known as “off-premises coverage” for this situation. Your deductible will apply, and the coverage may only provide reimbursement to a certain percentage of your personal property limit.
Personal accident insurance
If you’re in an accident with your rental car, and are injured, this coverage pays for your and your passengers’ medical bills.
If your personal auto insurance policy has medical payments coverage or personal injury protection, that coverage may extend to the rental car. Your own health insurance may also provide some reimbursement for medical care.
Situations where your policy may not apply
So if you have personal auto insurance with full coverage, you may be breathing a sigh of relief. Be aware, however, that there are some situations where your policy may not apply.
Traveling internationally
If your travels take you beyond the U.S. or Canada, your personal auto insurance may not apply to a rental car — your insurance agent or company can let you know for sure.
Note that many of the major rental car companies include liability coverage automatically in destinations such as Mexico, Europe, and Australia; but they may not automatically provide a CDW or other coverages. Check with the rental company to find out what is and isn’t offered.
Traveling on business
If you’re traveling on behalf of your employer, your personal auto insurance policy may not apply to a rental car. In this case, check with your employer — and if necessary, your insurance company — to understand what coverage you need.
You’re insured with a commercial auto policy
If your only car insurance is a commercial auto policy (a policy for business vehicles) and you rent a car for personal use, that policy probably will not provide coverage for the rental. In this case, you may want to look at some of the insurance options listed below.
Other rental car insurance options
Besides a personal auto insurance policy, you have some other resources to insure a rental car. These can be lower-cost alternatives to the insurance offered at the rental counter, but be aware that they may have some limitations.
Your credit card
Many credit card companies provide some coverage for rental cars, assuming you’re using that card to pay for the rental. Note that this coverage is considered “secondary,” meaning it pays only after any applicable personal auto coverage has paid out for damage or injuries. There may be other limitations as well, such as no coverage for certain types of vehicle or types of damage. Check with your credit card company to understand exactly what coverage is provided.
Travel insurance
Some travel insurance policies offer optional damage coverage for rental cars. Note that these policies typically do not include coverage for liability, and may not cover certain vehicle types. If you’re considering purchasing travel insurance for your trip, this might be an option worth looking into.
Standalone policies for rental cars
A number of third party companies sell standalone policies for rental cars. These policies generally cost a few dollars per day and provide coverage for vehicle damage, so they work as an alternative to the rental company’s CDW (which is usually much more expensive). Depending on the company, they may provide coverage internationally as well.
What these policies tend not to provide is liability coverage (Bonzah is one company that does offer coverage for both liability and damage).
How to choose
The bottom line is that you have a lot of options for rental car insurance. The key is to review these options long before you approach the rental car counter, so you can be confident you’re getting coverage you need to drive. A little extra preparation can go a long way toward making your trip a successful one.
It’s also important to contact your insurance company or agent to discuss your needs. Insurance agents are dedicated to providing personal service and advice in situations just like this. They can be an ally for making sure you have the coverage you need.