Renting a car overseas
By Melanie Chambers • Bankrate.com

"This happens all the time to us, and we live here," says the Italian bellhop at a nearby hotel who came out to see my car accident. "We always buy bad cars, smash them up and then buy a new one." This is advice I could have used before renting a car in Italy.

His kind words made squishing into the side of a bus somewhat better, but having bought extra insurance that morning made me feel even better.

I wasn't going to buy it at first -- I assumed my credit card insurance would cover it. But it turns out, that's not the case. In fact, many of my assumptions about renting a car overseas were proven wrong. It's a bit more complicated, and a whole lot more expensive, than I ever imagined.

Before you leave
To keep your costs down, book your rental through a travel agent or a rental agency before you leave home, as they have discounted rates with companies in the countries you'll be visiting. Most international agencies will charge a more expensive walk-in rate if you try to book once you arrive at your destination.

Be sure to book with a well-known rental agency such as Avis, Hertz or Budget. They offer more locations to pick up and drop off your vehicle, and are available to help if you find yourself in trouble.

Most importantly, check to see if your credit cards, and current car insurance, will cover part or all of the insurance. "Many customers often arrive at the Hertz location not knowing what type of insurance they do or don't have," says Leann Sabato, public affairs specialist for Hertz, based in New Jersey. "Thus, it's impossible for our representatives to provide any guidance."

If you don't know what you have, you might end up paying for more insurance than is necessary.

"Some car rental agencies are real shysters and will try to sell you extra insurance," says Sarah Wood, a travel agent with Durham Travel in Oshawa, Ont.

Ensure you're insured
A good rule of thumb is to ask your credit card company for a letter stating your level of insurance to show the car rental agency. (Keep in mind, however, that in some parts of the world, such as Asia, credit card insurance is not accepted -- you have to buy local insurance.)

Most gold or premium credit cards will offer collision damage, which covers damage to the car itself. If your card doesn't cover collision, consider switching to a credit card that does before you leave. Typically, collision insurance costs $20 a day.

Depending on where you go, other insurance may be required. For instance, theft insurance, about $10 a day, is mandatory in Italy. "Italy has real problems with theft," says Wood.

Another option is using your home or existing auto insurance. However, be warned: If you have an accident and make a claim, your home insurance will increase. And most Canadian auto insurance isn't valid outside of Canada or the US.

Finally, it's important to realize that third-party insurance, which protects you in case you hurt someone or damage another car, is not provided under collision policies.