Rental car insurance protects from financial wreck
By Dana Dratch • Bankrate.com

Do your vacation plans include renting a car? If so, your insurance agent, not your travel agent, needs to be first on the call list. And it's not too soon to start thinking about which credit card you want to use to pick up the tab.

That's because insurance firms, car rental agencies and credit card companies are all competing for your insurance dollar -- and what they offer today could be very different from what they will offer next week.

"It's a constant battle, a fight for advantage," says Gerry Goldsholle, the CEO and founder of FreeAdvice.com, a legal Web site for consumers. "It's like something out of Mad Magazine's Spy vs. Spy."

While everyone wants to be your friend now, that could change if you have an accident. "And you don't want to be caught unprepared," says Goldsholle.

Collision and liability
Ultimately, it's up to you to make sure you're covered. So plan ahead. If you have auto insurance, call your agent and find out what kind of coverage you have. Most auto policies extend to rental cars. Ask specifically about two things: collision damage waiver and liability. Collision damage waiver, or CDW, covers any damage to the car you are driving. Liability covers damage you do to someone else.

"These are the two areas where you don't want to make a mistake," says Jeanne Salvatore, senior vice president of consumer affairs for the Insurance Information Institute, a nonprofit industry-sponsored organization. "These are the two areas that are costly."

In addition, if you're worried about theft of your belongings, check your homeowners or contents insurance to make sure that what you're packing is protected.

Ask your insurance agent if there is a limit on your collision insurance. If you normally drive a 10-year-old Honda, but are planning to rent a brand new Lincoln Town Car, make sure that your policy will cover the complete cost of replacing the more expensive vehicle.

"If you're driving a Toyota worth $4,000 and you total a rental that's worth $15,000 -- you've just lost $11,000," says professor Rob Weagley, chairman of the consumer and family economics department at the University of Missouri-Columbia.

Some companies don't limit the collision insurance -- meaning you are fully covered no matter what you drive. Other policies set a limit or exclude certain vehicles, like luxury cars. Find out ahead of time what the rules are.

If you normally drive an old clunker and you've dropped your collision insurance -- or you don't have either a car or insurance -- you need to purchase a policy at the rental counter or use a credit card that will give you coverage. If you rent cars frequently, get estimates from your regular insurance agent on a policy to cover you -- it might be the cheaper alternative.

Credit card coverage
Some credit card companies will supplement your auto insurance when you rent a car. Diners Club, for example, provides unlimited collision insurance for a limited period. But the policy excludes exotic cars -- like Porsches and Lamborghinis -- and does not include liability coverage. Also, if you purchase additional collision insurance from the rental car company, you automatically invalidate your Diners Club coverage.

Shop carefully. Two people can carry the same credit card, issued from the same bank, but still be eligible for different rental benefits. In the case of American Express, even having the same level of card -- regular, blue, gold or Optima Platinum -- is no guarantee you have the same insurance privileges.