Should you buy rental car insurance?
- Know what your credit card covers versus what the rental car company insurance covers.
- Some credit cards offer extra rental car insurance protection for a fee.
- Loss damage waivers only cover the car itself – not personal injury or anything else.
After battling security checks, turbulence and baggage claim, weary travelers often face puzzling choices at the car rental counter. Should they buy the rental car insurance offered by the rental car company, or is it enough to depend on their credit card for coverage?
Most credit cards offer some kind of free coverage for damage or loss to a rental car resulting from an accident or theft as long as you charge the rental to that card.
"The reason they offer this kind of coverage is the issuer would rather have you book your car on their credit card," says John Ulzheimer, president of consumer education at SmartCredit.com.
On the other hand, the rental car company provides this coverage for as much as $29.99 per day, depending on the vehicle and state laws.
It seems like a no-brainer to let your credit card cover your car rental. But before you turn down the rental car company's offer, make sure you know what you're getting. Bankrate outlines what you need to know and offers an easy-to-read chart to compare rental car company insurance versus credit card coverage.
Cover all your bases
Credit cards offer only one type of coverage: the loss and damage waiver, also called a collision damage waiver. This waiver covers the cost of repair to a damaged car or the replacement of a totaled or stolen car. It does not cover anything else.
"Just understand that this is not liability insurance and doesn't cover you for damage, injury or death that you cause," says Linda Sherry, director of national priorities at consumer advocacy group Consumer Action.
Some credit cards may offer supplemental protection for a fee. American Express cardholders can buy the company's Premium Car Rental Protection for $19.95 per rental (up to $75,000 in coverage) or $24.95 per rental (for up to $100,000 in coverage), which includes primary insurance, accidental death or dismemberment benefits, and medical and personal property insurance.
If your card doesn't offer a supplemental plan, Sherry advises consumers to check their personal auto policy, if they have one, to see if liability protection is included for car rentals. Otherwise, go with the coverage offered by the car rental agency for liability because your credit card won't provide it.
Know your coverage
Just because your credit card offers loss and damage coverage doesn't mean that it's the best option for you. Some cards offer better protection than others. It pays to call your credit card issuer beforehand and find out how much the protection covers, if towing or out-of-use fees are included, and what restrictions may apply.
In general, American Express offers the most coverage, dollar-wise. All cards come with up to $50,000 in loss and damage coverage. Its two premium cards -- the Platinum Charge Card and the Delta Reserve credit card -- provide up to $75,000.
Certain Discover credit cards offer up to $25,000 of coverage, and Visa credit cards cover up to the cash value of the rental car. MasterCard cardholders must contact a customer service representative for more details.
Visa and American Express cover the cost of towing and any fees the rental car company charges for the rental vehicle being out of use, but others don't. Discover cards don't cover loss-of-use charges, and only Discover's Escape credit card covers towing fees. (Again, MasterCard customers must call for details.)
Don't forget the restrictions. Many credit cards don't cover certain types of luxury vehicles, moving vans or trucks, or even passenger vans, says Sharon Faulkner, executive director of the American Car Rental Association. That means you may have to rely on the coverage offered by the rental company.
Other credit cards limit the rental time or restrict where you can rent. For example, American Express' loss and damage waiver only covers the first 30 days of the rental, while Visa doesn't cover car rentals made in Israel, Jamaica, the Republic of Ireland or Northern Ireland.
"You'd better understand what the exclusions are," says Ulzheimer, "especially if you rent a car and take it across state or country lines."
Your choices for loss and damage coverage aren't always just between your credit card and the car rental company. Often, a personal auto policy covers car loss and damage to a car rental, and it could be more comprehensive than your credit card's coverage. Plus, you don't have to use a particular credit card to get the coverage. Check with your insurance agent to find out what your personal policy offers.
Know that your personal auto policy may have a deductible that you need to cover in the off chance something happens with your rental. If you book the rental car under your credit card that offers a loss and damage waiver, the card may pay the deductible as a secondary coverage to your auto policy. It pays to ask your credit card company if it covers your personal auto policy deductible.
If you're traveling for business, check with your employer about company travel insurance that covers car rentals before depending on your credit card or personal auto policy, says Faulkner.
"The car rental company is just as happy to collect from your credit card company or personal auto policy to cover a damaged rental car," says Faulkner, who owned a Dollar and Thrifty car rental franchise in Albany, N.Y., for more than a decade. "Don't assume that a car rental company's coverage options are a high-sales tactic."