Do I Need Rental Car Insurance?

When you rent a car, the most stressful decision just might be whether to accept the rental car insurance.

Rental car insurance can provide short-term coverage if you need to rent a vehicle on vacation or while your car is in the shop. But insurance for a rental can be complicated, and in some cases, you might already be covered.

Understanding how car rental insurance works can help ensure you’re getting the coverage you need without overpaying.

How does rental car insurance work?

Unlike coverage for primary vehicleswhich is relatively standardized and offered by large and regional insurance carriers, rental car insurance can come in different forms and from various types of providers.

If your car is in the shop, for example, your personal auto policy will extend to the rental. In some cases, you may even be able to get reimbursed for your daily rental fee.

If you’re renting a car for travel or leisure, on the other hand, you may opt to buy coverage directly from the rental agency, but you may also be at least partially covered by your personal auto policy or even by your credit card provider.

However, there’s no single coverage that includes everything. Instead, rental car agencies and auto insurance carriers will offer different types of coverage that you can choose from based on your needs.

Types of rental car insurance

Car rental companies offer four different types of car rental insurance coverage, most of which may already be covered by your personal auto policy. The rental agency will typically allow you to choose which types of coverages you want instead of bundling them all together.

Here’s a quick breakdown of each type.

Collision-damage waiver

Also called a loss damage waiver, this coverage protects you against any damage or loss to the rental, even if you’re at fault. In addition to physical damage, it will also cover towing and storage costs, impound fees, loss of use and other charges.

Supplemental liability protection

This coverage provides financial protection in the event that you cause personal injury to another person or damage to their vehicle or personal property. Most states require car rental agencies to include some liability coverage as part of your rental fee. However, this basic protection is typically only the state’s minimum required limit, which isn’t sufficient for major accidents. Rental agencies also offer supplemental liability protection that you can buy. The coverage can be for as much as $2 million in some cases.

You can use your personal auto policy’s liability coverage instead of paying for the rental agency’s insurance. But if you don’t have a car or aren’t relying on your personal policy, experts strongly recommend purchasing supplemental liability insurance, even if you opt to skip other types of insurance offered.

“You could have a lifetime financial catastrophe if you don’t have enough liability insurance,” says Bob Hertel, director of product development, personal lines at Acuity Insurance.

Personal accident insurance

Personal accident insurance provides coverage for you and other passengers in your vehicle if one of you sustains an injury and needs medical attention or if there’s an accidental death.

Personal effects coverage

While the collision damage waiver covers damage to the vehicle, it doesn’t include personal belongings. Adding this coverage to your rental agreement will provide protection if your personal effects are stolen from the car or damaged in a collision.

How much is rental car insurance?

The cost of car insurance for rental cars varies depending on the provider, type of vehicle, type of coverage and other factors. With that said, here are average costs for the different types of coverage agencies provide to help you know what to expect:

coverage type Average cost per day
Collision-damage waiver $20 to $30
Supplemental-liability coverage $8 to $17
Personal-accident insurance and personal-effects coverage $5 to $11*
TOTAL $33 to $58

*Personal accidents and personal effects coverage are often sold together

Source: AutoSlash

Does my car insurance cover rental cars?

If you have a personal auto insurance policy, you may not need to buy the rental car agency’s coverage, especially if your car is in the shop on a covered claim.

If you’re traveling in the US or Canada, car insurance companies typically extend your coverage to rentals with the same coverage limits and deductibles. If your personal policy includes collision and comprehensive coverage, liability protection and medical payments or personal injury protection, you probably don’t need to buy additional insurance from the rental agency.

Even if the rental is worth more than your personal vehicle, you’ll still be covered with collision and comprehensive coverage, says Hertel. That said, if you don’t have full coverage on your personal vehicle, you may need to purchase additional coverage at the counter to avoid being on the hook in the event of an accident.

There is, however, a catch. Your personal auto insurance will also only cover the rental car if it’s for your personal use. It will not cover a rental car used for business or work purposes. And if you’re traveling outside of the US or Canada, your personal policy won’t cover you at all.

Even if you have full coverage on your personal vehicle, you’ll have to pay your insurance policy’s deductible—there’s typically no deductible required on rental insurance. What’s more, filing a claim can potentially cause your premiums to increase, which can cost you more in the long run compared to a rental agency’s coverage.

A quick side note: If you’re renting a large moving truck, your personal auto policy’s coverage typically won’t extend to the rental due to weight limits on the rental vehicle. However, smaller trucks or vans may be covered.

Rental reimbursement coverage

If your personal vehicle is damaged and needs repairs, your personal auto policy may offer optional coverage that will reimburse you for the cost of a rental or for public transportation—up to a daily limit—while your car is in the shop on a covered claim . Note that if someone else causes damage to your vehicle, your rental will usually be covered by their insurance policy.

Rental reimbursement coverage typically costs between $1.50 and $10.50 a month, depending on the carrier and your coverage levels.

Does my credit card cover rental cars?

Many credit cards offer a collision-damage waiver as a benefit to cardholders. Simply use your card to pay for the rental and decline the rental company’s coverage to activate the perk. It’s particularly common among travel credit cards.

However, note that liability protection and insurance for personal injuries or belongings are not included in credit card rental car insurance. You can add these other coverages at the rental desk—you only need to decline the collision-damage waiver.

There are some other caveats to keep in mind before going this route:

  • Most cards offer secondary coverage: Secondary credit card rental car insurance requires you to file a claim with your personal auto insurance policy first—if you have one—and may only cover your deductible. If you don’t have a personal auto insurance policy, however, that coverage becomes primary coverage. Some cards offer primary coverage regardless of whether you have a personal vehicle policy.
  • There are limitations: In your card’s benefits guide, you’ll find a long list of limitations and exclusions based on where you’re traveling, the type of vehicle you’re renting and more.

“You really need to read the fine print,” says Carol Sheehan, claims director for Plymouth Rock Assurance, a Massachusetts-based insurance provider. “Your card might not be giving you as much coverage as you need.” It’s important to understand what is and isn’t covered, as well as the process for filing a claim.

American Express offers a unique option for cardholders with its premium rental car protection. If you’re not satisfied with secondary coverage, you can purchase primary coverage at a rate of up to $24.95 for the full rental period—that’s cheaper than what some car rental agencies charge for a day. The standard American Express rental car insurance also includes coverage for personal effects, injuries and accidental death but does not include liability protection.

When do you need rental car insurance?

It’s a good idea to have insurance every time you rent a car, but that doesn’t necessarily mean you have to buy the coverage offered by the rental car agency. Check with your personal auto insurance carrier and your credit card company first to get an idea of ​​whether or not you’re adequately covered before you get to the rental counter.

With that said, here are some instances where it likely makes sense to pay for rental car insurance:

  • You don’t have a personal auto insurance policy.
  • You’re traveling outside of the US and Canada and won’t be covered by your personal policy.
  • You are traveling for business or using the vehicle for work purposes.
  • Your personal auto insurance policy doesn’t include every type of coverage you need.
  • Your personal insurance policy has a high deductible or low coverage limits.
  • You want to avoid a potential claim on your personal vehicle policy.

Sheehan recommends figuring out how your rental will be covered long before you’re at the rental agency counter. “You’ll have a lot of information coming at you, and you’ll be asked to sign a lot of things,” she says. You might feel rushed, but knowing how to answer the insurance questions beforehand can help you avoid unnecessary costs.

Got a money question? Let Buy Side find the answer. E-mail [email protected].

Include your full name and location, and we may publish your response.

The advice, recommendations or rankings expressed in this article are those of the Buy Side from the WSJ editorial team, and have not been reviewed or endorsed by our commercial partners.