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Rental car insurance explained

woman receiving key for rental car
Martin Dimitrov/Getty Images
woman receiving key for rental car
Martin Dimitrov/Getty Images
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Most of us rely on our cars every day, and life can grind to a halt if you suddenly no longer have the use of your vehicle. You may have to rent a car to keep yourself on the road and on schedule. But is rental car insurance required? No matter the reason for your rental, it is essential to protect your finances from the unexpected. Bankrate has some tips on rental car coverage to help you navigate the many options available.

When do you need rental car insurance?

Figuring out if you need rental car insurance can be confusing. The type of coverage you carry on your personal auto policy, your contract terms and the reason you are renting a vehicle can all determine whether you should purchase extra rental car coverage.

In most cases, the coverage you carry on your auto policy will extend to a rental car as long as you rent a private passenger vehicle. In some scenarios, however, your personal auto policy can leave gaps in coverage that will cost you if you are in an accident in your rental car. Most insurance professionals advise exploring your options with your agent before driving off in a rental vehicle.

Types of rental car insurance

Rental car insurance is somewhat similar to regular auto insurance. You can select the type of coverage and the level of coverage you want based on your needs. However, the types of rental car insurance are much different than auto insurance.

Before getting rental car insurance, you should be aware of your options. The most common types of rental car insurance include:

  • Loss-and-damage waiver (LDW): Sometimes called the collision damage waiver (CDW), this is a waiver, rather than a true policy. It essentially says that the rental company will not come after you in the event that the rental car is damaged or stolen. However, if you have collision and comprehensive car insurance, this may be included in your policy.
  • Supplemental liability protection: This covers damage you do to other vehicles or property. However, your own liability insurance may cover these instances, even when you are driving a rental car.
  • Personal accident protection: Personal accident protection covers the medical costs for you and any passengers if you are involved in an accident. Again, if you have personal injury protection or medical payments coverage under your existing policy, you may already be covered.
  • Personal effects coverage: This coverage pays for any belongings that may be stolen from your rental car. In this case, your homeowner’s insurance or renter’s insurance policy may offer similar coverage.

While there are many different types of rental car insurance, it does not cover everything. For example, you would not use this type of policy to be reimbursed for the cost of renting a car while your normal vehicle is being repaired as part of a claim. In that instance, you would use what is known as rental car reimbursement coverage, another option which is included under most typical auto insurance policies.

You do not have any type of insurance

Driving without any type of car insurance is illegal in most states, and it could land you in serious legal and financial trouble. To be compliant with the law and to avoid putting yourself at financial risk, it’s important to have the proper coverage in place when renting a vehicle.

According to financial expert Laura Adams, “If you do not have auto insurance, you should purchase liability and a damage waiver for a rental car, at a minimum. If you have a non-owner auto insurance policy, it only covers liability, so you should purchase damage protection.”

Some uninsured drivers rely solely on the rental car coverage that their credit card company provides. Although rental car coverage through your credit card can be helpful if you already have a primary insurance policy, it might not offer adequate protection as the only means of insuring your rental vehicle. Before declining additional damage protection, you may want to call your card issuer for more information on their rental car coverage policy.

You do not have collision or comprehensive coverage

If you do not have collision and comprehensive coverage on your personal auto insurance policy, you should consider purchasing an LDW. Suppose you carry liability only on your personal auto policy and cause an accident in your rental vehicle without an LDW. In that case, the rental car company can sue you for damages to the rental car since your personal policy will not cover it.

“If you also have collision and comprehensive auto insurance, they cover physical damage and may extend to a rental car. However, state laws vary, so be sure to check with your insurance carrier,” says Adams.

Adams states, “Knowing whether you should purchase rental car insurance depends on the type of coverage you already have or do not have. For instance, if you have liability coverage, it follows you when you rent a car. Liability protects you from a lawsuit if you cause injury to someone or their property.”

You are going on a business trip

If you are going on a business trip in your personal vehicle, your car insurance policy might have some limitations. For instance, if you got into an accident while driving to a conference or a big meeting, it might not be covered. The same applies if you have a client or work tools in your vehicle.

Some car insurance companies exclude coverage when you use your personal vehicle for business. Others may extend coverage, but only in certain situations or for specific occupations. To make sure that you are adequately covered, you may want to consult with your agent before renting a vehicle for a business trip.

You do not want to pay a deductible

If you rely on your personal car insurance to protect your rental car, and you get into an accident, you will pay a deductible. However, if you buy rental car insurance and you get into a collision, there is no deductible required.

How much is rental car insurance?

The cost of rental car insurance depends on a few factors. For one, it depends on the company you buy coverage from. It also depends on the state, what type of car you are renting, and how many miles you are driving. Purchasing add-on coverages will also increase the amount you pay.

Does my credit card offer rental car insurance?

Many credit card companies offer rental car insurance as one of the benefits for cardholders. However, rental car insurance provided by your credit card company is usually secondary insurance. That means if you get into an accident or the car gets stolen, your auto insurance company will get billed first. If that is the case, your deductible will apply to the claim.

There are some credit card companies that offer primary rental car insurance, although it is less common. Primary insurance does not go through your personal auto insurance, so you do not have to pay a deductible. You can call your credit card company to determine if your card offers rental car insurance and what type of insurance they offer.

Most major credit card companies, like Visa, MasterCard and American Express all offer some form of rental car insurance for their cardholders. To take advantage of the coverage, you usually have to pay for the rental car using the card and rent the car in your name.

Which insurance providers offer rental car insurance?

Most major car insurance providers automatically provide rental car insurance coverage at no additional cost beyond what you are already paying for your monthly premium. However, it is important to remember that the coverage you carry on your policy is what will also apply to your rental. If you have liability only on your personal auto policy, you may want to consider bridging the gap with an LDW.

Some companies offer standalone rental car coverage policies. The rates for these policies can be cheaper than a standard auto policy, but the coverage provided is not as robust.

  • Allianz Global: Allianz Global’s Rental Car Damage Protector includes $50,000 in coverage, for just $11 per day, and offers coverage anywhere in the world. Every policy comes with up to $1,000 in coverage for lost baggage and personal items, and $1,000 in trip interruption coverage.
  • Bonzah: With a RoamRight Auto Rental Insurance Plus policy from Bonzah, you can get up to $35,000 in coverage, plus up to $500 in coverage for lost luggage and personal items, no deductible and a 10-day free look period. Bonzah also offers up to $1 million in supplemental liability coverage.
  • RentalCover.com: Rental car insurance from RentalCover.com is meant to supplement insurance from your credit card provider. The company claims that drivers can get supplemental insurance for up to 50% less than an LDW waiver from the rental counter. One of the biggest draws is that drivers can cancel their rental insurance for a full refund up until their car pick-up time.
  • Sure: Sure is a mobile-based rental car insurance company that is entirely digital. When you download the app, you can select your trip dates, the type of coverage you want, the deductible and more. That means you can update and make changes to your choices on-the-go. Every policy comes with great perks, like flat tire protection and lost key reimbursement.

Frequently asked questions

Written by
Lena Borrelli
Insurance Contributor
Lena Muhtadi Borrelli has several years of experience in writing for insurance domains such as allconnect, Healthline and Reviews.com. She previously worked for Morgan Stanley.
Edited by
Insurance Editor