How a rental car is covered by a credit card
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Speak to any rental car company employee before renting a car, and you’ll surely be asked if you want to purchase extra insurance. But at $15 to $30 a day, buying this additional coverage is like paying $5,000 to $10,000 a year to insure your car.
Thankfully, you may be able to receive similar coverage through your credit card. In fact, rental car coverage may be one of the most valuable benefits offered by some credit cards. However, it’s important to understand how this coverage works, and what its limitations are.
What is car rental insurance?
Whenever you rent a car, you should always have insurance that covers at least theft or damage. If you own a car, then your car insurance will likely cover you when you rent a car in the U.S. Nevertheless, you might not want to rely on your personal coverage, or you might need coverage when you rent outside of the country.
Many credit cards include a form of coverage called a collision damage waiver. When you pay for your rental car with your credit card, and you decline the optional insurance, this coverage can take the place of the expensive policies sold by rental car companies, at no additional cost.
- The global car rental market size was valued at $92.92 billion in 2019 and is projected to reach $214.04 billion by 2027.1
- In 2022, there are 15,577 car rental businesses in the U.S.2
- Most rent-a-car businesses operate in California (1,355), Florida (1,050) and Texas (960).2
- The international vehicle rental market experienced a decrease of 32% in 2020.2
- The U.S. vehicle rental market is expected to grow 26.9% in 2022.2
- Enterprise Holdings is among the largest companies in the world. Its three companies, Enterprise Rent-A-Car, Alamo Rent-A-Car and National Car Rental, combined, serve more than 95% of the global vehicle rental market.2
- Due to less demand for rental vehicles during the lockdown, Hertz lost 56% of revenue in 2020.
- The U.S. leads in tourism car rentals with its 2 million-strong vehicle fleet.2
- The average cost of a rental car in the U.S. was $30 per day in 2019 and $109 in 2021.2
- The J.D. Power 2021 North America Rental Car Satisfaction Study tracked customer experience with rental car companies between August 2020 and August 2021. The study found the average customer-cited price-per-day rental fee rose to $90.40 by the summer of 2022. During the 12 months of the study, overall customer satisfaction declined a total of 11 points (on a 1,000-point scale).3
Do credit cards cover rental car insurance?
Rental car coverage used to be standard on most credit cards, but some major issuers no longer offer this benefit. The best way to find out if your credit card includes rental car coverage is to call the number on the back of your card, or read the most recent version of its benefits guide.
How rental car insurance works
- Check to make sure that your credit card offers rental car coverage.
- Review the card’s benefits guide to ensure that the coverage applies to the type of car you’re renting and, if renting outside the U.S., the country you’re renting in.
- Reserve your car using the credit card that offers you coverage.
- Decline the optional damage and theft insurance sold by the rental car company.
- Pay for your entire rental using the credit card that offers you coverage.
- Abide by the rules of the rental car agreement.
Types of rental car insurance
Once you understand that your card can offer rental car insurance, and how to use it, it’s important to realize there are different types of rental car coverage offered by credit cards.
For example, credit cards can offer either primary or secondary coverage. If your card offers secondary coverage, then it requires that you make a claim with your personal automobile insurance first, if you have any. But if your card offers primary coverage, then you don’t need to ever file a claim with your personal automobile policy.
Also, keep in mind that all of the rental car policies offered by credit cards only insure the car you’re renting against theft and damage. If you are responsible for damage to another vehicle, injure a person or cause any other property damage, then any rental car coverage provided by your credit card won’t cover these losses. Additionally, most credit cards’ rental car coverage will exclude many types of vehicles, such as motorcycles, luxury cars and full-size vans.
Should your rental car be stolen or damaged, then you need to take several steps in order to file a claim. This includes submitting a copy of the accident report and the rental car agreement, as well as photographs and a police report. You’ll also be asked to supply proof that you paid for your rental with your credit card.
Additional ways credit cards cover your travel
Rental car insurance is just one of many kinds of travel insurance benefits that can be offered by your credit card. Other benefits may include trip delay insurance, trip cancellation and trip interruption coverage, lost luggage coverage and medical coverage.
Some premium travel rewards cards can also offer roadside assistance coverage. Many cards will dispatch help to you when your car breaks down, but you’ll have to pay for any services received. However, a few cards will even provide basic services at no extra cost.
Top six rental car companies in the U.S.
|Company||Cars in service||2021 revenue (millions)|
|Enterprise (including National and Alamo)||1,000,000||$15,664|
|Avis Budget (including Payless)||380,000||$5,900|
|Hertz (including Dollar and Thrifty)||285,000||$4,900|
You should always have rental car insurance, but there’s no need to pay extra for it if it’s included as a benefit of your credit card.
No, the coverage offered by credit cards only covers the rental car, not any damage to third parties.
Yes, the credit card covers all other authorized drivers.
The bottom line
Traveling is complicated, and can be stressful. You don’t want to be worrying whether you’re properly insured when you rent a car. But instead of paying for the overpriced coverage aggressively sold by rental car companies, you should look into the coverage offered by your credit card.
Not all credit cards include rental car coverage. Look into which cards do and what they cover. Booking a rental car on a card with adequate coverage will allow you to save money and enjoy the piece of mind you need, whether you’re traveling for business or pleasure.