Car Rental Insurance Basics

Rental car insurance may seem like an unnecessary cost, but there are certain benefits that come with this added expense. Here’s a look at whether you need car rental insurance.


If you have full coverage auto policy on your personal vehicle, you know you’re covered in case there’s an accident, even if you’re at fault. But, when you’re driving a rental vehicle, you may need separate coverage. If you’ve ever rented a vehicle, you were probably asked if you want to purchase car rental insurance from the rental agency. Some people choose to get the insurance while others don’t citing their full coverage policy will pay for any damage. Are you sure that’s really true?

Car rental insurance seems like a ripoff to some, but it has benefits and many state laws require them to offer converage to renters. It costs from $9 to $25 per day for certain levels of coverage.

Collision Damage Waiver

Collision damage waiver or loss damage waiver waives your responsibility for damages to a rental company. Instead, the car rental company takes the financial responsibility for any damages caused to the vehicle while you were driving it. The waiver also includes a loss of use period during which the car can’t be rented out because it’s being repaired. The car rental company loses money during these days and if you don’t have the collision damage waiver, you may have to pay these costs in addition to the cost for repairs. You may void out your waiver if you were driving under the influence of drugs or alcohol.

Liability Insurance

Liability insurance covers the medical and property costs if you injure another person or their vehicle while you’re driving the rental car. Most state laws require you to have some type of liability coverage, if not from the car rental company, then from your own car insurance provider or another company.

Personal Accident Insurance

Personal accident insurance pays for medical expenses for you and passengers if you’re in an accident. However, your health insurance plan, if you have one, would cover these types of expenses, but only for you or your family members if you have a family plan.

Insurance Through Your Auto Insurer

Your personal auto insurance may cover you if you havean accident while you’re driving a rental car, but you need to confirm this before you rent the car and beforeyou’re at the counter trying to make a decision. Also find out which costs are covered and which are not. For example, your auto insurance may not cover a car rental company’s loss of use fee that occurs when the vehicle can’t be rented because it’s being repaired. You could end up paying that fee out of pocket even though your auto insurer covered you.

Also, if there’s damage, you’ll have to pay your deductible once you return the rental. You won’t have time to come up with the money; they can just charge the credit card you used to hold the rental.

You’ll have to make a claim with your insurance provider and could face a premium increase, even if the accident wasn’t your fault.

Car Rental Insurance From Your Credit Card Issuer

Many credit card companies also provide rental car insurance coverage at no charge as a benefit to their credit card customers. To get the benefits, you must pay for the rental in full with the credit card. You also have to decline the car rental company’s insurance and waiver to invoke the benefits from your credit card. A lot of credit card car rental insurance policies are secondary insurance, meaning they only pay what your primary car insurance company doesn’t. You’ll still have to make a claim with your insurance company.

Read the fine print to make sure your rental will be covered. There are lots of exclusions and if one of them applies to you, the credit card company may not pay. Coverage amounts may be limited, depending on the credit card issuer and the type of credit card you have. Certain vehicles, like limousines and trucks, may be excluded from coverage. Long-term rentals may not be covered.

Rental car insurance may seem completely unnecessary until someone backs into you or scrapes the side of the rental you parked on the side of the road. Explore your car rental insurance options before you rent the car and if you decide to decline, be 100% certain that you’re covered elsewhere.