During the hot summer season, it’s easy to be more concerned with getting a tan than having adequate insurance for your rental car. But not knowing whether your personal auto insurance policy or credit card provides adequate protection can lead you to purchase duplicate coverage or drive off underinsured.

Many people aren’t sure how much coverage they already have. About 42 percent of consumers said they were either “thoroughly confused or had only a rough idea about insurance coverage when renting a car,” according to a 2007 survey from the National Association of Insurance Commissioners, or NAIC. Of those who held credit cards, around 24 percent said they weren’t sure if their credit card provided insurance benefits for car rentals.

To avoid making a costly mistake when you rent a car, research your existing coverage before taking a vacation. Call your insurance agent and the credit card issuer of the card you plan to use. Ask which types of coverage you have and what the limitations are. Benefits can vary among cards from the same issuer, so inquire about your specific card.

Which types of rental car insurance should you worry about?

Types of coverage

Jeanne Salvatore, consumer spokeswoman for the Insurance Information Institute, or III, says there are essentially four types of coverage for rental cars, but two in particular are must-haves.

“The most important coverages are the liability and the collision damage waiver. You don’t want to make a mistake with either one of those,” she says. If you don’t have either coverage through your auto insurance or credit card, it might be wise to purchase them through the rental car agency.

1. Collision damage waiver. The collision damage waiver or loss damage waiver, abbreviated as CDW or LDW, protects the rental car against theft or damage.

“Many credit cards will include some level of collision and theft protection,” says NAIC president Jane Cline. To use this benefit from your credit card, you have to use that specific card to charge the rental and decline the CDW or LDW offered by the rental car agency.

Cline warns that in most cases the benefit would be secondary to your personal auto insurance. In other words, secondary coverage would supplement your car insurance, which could lead to increased premiums if you have to file a claim.

Cards that provide primary coverage would shield you from increased premiums with your insurance company. For example, Premium Car Rental Protection from American Express offers primary coverage for theft or damage to the rental vehicle at a flat fee of $24.95 per rental period.

A CDW or LDW may also include coverage for costs that occur after an accident, such as towing charges, storage and “loss-of-use” fees, which compensate the rental agency for the amount of time that the damaged car is out of service for repair.

Find out from your card company or auto insurer if the CDW or LDW covers such fees and how it verifies them. For example, MasterRental Insurance for World MasterCard cardholders requires the consumer to get a copy of the vehicle rental location or class-specific fleet utilization log from the rental agency.

If the rental company won’t release the fleet log, then you may have to pay the fees out of pocket, which the III says can cost “anywhere from several hundred to several thousand dollars if you are involved in an auto accident.” Purchasing the CDW from the car rental company would shield you from these fees.

2. Liability coverage. Having this insurance protects you when you cause damage to other people or property in a car wreck.

“If you have liability on your own car … then you don’t have to necessarily get the liability coverage,” says Salvatore. Of course, make sure the coverage level you have is high enough for the type of vehicle you will rent.

“If you don’t have a car, then you probably need to get the coverage,” she adds. Credit cards don’t typically provide personal liability coverage.

3. Personal effects coverage. This coverage applies to theft and damage to personal belongings in your rental car.

Do you need it? If you don’t plan to leave anything valuable in the car, maybe not. You also may have some coverage through your renters or homeowners insurance. Check to see if your policy includes protection for personal belongings when you travel.

Credit cards don’t generally provide this benefit, but there are some exceptions. Premium Car Rental Protection from American Express offers secondary protection for personal property.

4. Personal injury or personal injury protection. This type of insurance covers medical expenses for you and the passengers in your rental car in the event of an accident.

If you have adequate health insurance coverage or already have this protection under your personal auto insurance, you may be able to decline this coverage. Credit cards generally don’t provide this benefit.

Bottom line, your credit card likely only covers the collision damage waiver, which in most cases will supplement your car insurance. If you have no other insurance, you should strongly consider purchasing coverage from the car rental company.

Ask about exceptions

Once you know how much coverage you have through your auto insurance policy and credit card, find out if there are situations that would render coverage null and void. Collision damage waivers, for example, may be invalidated if damage or theft is caused by reckless or drunken driving, unlocked doors or driving off-road. In addition, the policy may exclude specific types of vehicles or rentals in certain countries. Your insurance may limit coverage to short-term rentals.

If you are traveling on business, the NAIC recommends checking with your employer about coverage. A personal auto insurance policy generally won’t cover rentals for business use.