Car Rental Insurance: What to Watch out For
Do you need rental car coverage if you already have car insurance? The agent at the airport rental car counter asks you the dreaded question about insurance coverages. Accepting all coverages raises your $49-per-day rental to $100-per-day. But how much protection do rental car insurance policies provide, and do you really need them?
Although purchasing rental car insurance has some advantages, you may already have all of the coverage you require if you have auto insurance for your personal vehicle at home.
What Is Car Rental Insurance?
The insurance coverage purchased from a rental car agency provides many of the same types of protections as your personal auto insurance, but the terminology is different.
Typically, the rental agency will provide the following coverage options:
Liability Insurance
Rental car liability insurance provides the same types of protections as personal auto liability insurance. When you're at fault for an accident, liability coverage pays to repair another driver's car and covers their medical expenses (and those of their passengers).
Most states require all drivers to have minimum liability insurance coverage. For example, California requires owners of private passenger vehicles to purchase $15,000 in bodily injury liability insurance to cover the injuries of one person, $30,000 in bodily injury liability insurance to cover the injuries of multiple people, and $5,000 in property damage liability insurance.
Loss Damage Waiver (LDW or Collision Damage Waiver [CDW])
If the rental car is damaged or stolen while in your possession, LDW coverage relieves you of responsibility. It may also include towing coverage and loss of use coverage, which reimburses you if the vehicle is rendered inoperable during the contract period. LDW coverage, like collision coverage on a personal auto insurance policy, has exclusions, so it's critical to read and understand the fine print. For example, if you cause an accident while intoxicated or speeding, LDW may not cover the vehicle.
Personal Accident Insurance
Like the personal injury protection (PIP) or medical payments coverages of a personal auto insurance policy, personal accident insurance helps pay for the medical expenses of you and your passengers, regardless of who is at fault for an accident.
Personal Effects Coverage
Personal effects coverage can help pay to replace your personal belongings if a thief steals them from your rental car.
How Much Does Rental Car Coverage Cost?
Buying insurance at the rental car counter can significantly raise the total cost of your rental. The Department of Insurance, Security, and Banking in Washington, D.C. outlines typical rental car coverage cost ranges:
- Loss damage waiver: $10 to $20 per day
- Liability insurance: $7 to $14 per day
- Personal accident insurance: $1 to $5 per day
- Personal effects coverage: $2 to $5 per day
What Does Your Personal Auto Policy Cover?
If you have personal auto insurance, your coverage may extend to a rental car. However, before you forgo the coverage provided by a rental car company, you should understand the terms of your auto insurance policy and consider the limits of each coverage, as well as your deductible.
Collision Coverage
You may not need to purchase LDW for a rental car if you have collision coverage on your personal vehicle. However, keep in mind that if you total the rental car, your insurer will only pay up to the limit of your policy.
Consider purchasing LDW coverage if you're renting an expensive vehicle that would cost more to replace than your collision limit, such as a sports car on vacation. Furthermore, your personal collision coverage may only cover a rental car for personal use and not for business travel.
Liability Coverage
Although the liability coverages on your personal vehicle may cover a rental car, you must have enough coverage to meet the legal requirements in the state where you are renting the vehicle. For example, if you live in California and only carry the mandated minimum liability coverages, you wouldn't meet the state requirements in Oregon, which requires higher limits for bodily injury and personal property liability coverages.
Comprehensive Coverage
Comprehensive coverage can assist in the replacement of your vehicle if it is stolen or suffers non-collision damage, such as vandalism. However, many car owners discontinue comprehensive coverage after their last car payment. Because LDW waives your responsibility if your rental car is stolen or damaged, it's a good idea to get it if you don't have comprehensive coverage on your personal vehicle.
Medical Payments Coverage and Personal Injury Protection
You may not need to purchase personal accident insurance when renting a car if your auto insurance policy includes medical payments coverage or personal injury protection (PIP). Again, carefully review your policy to determine whether it covers a rental car. PIP, or medical payments coverage, will pay up to a certain amount, which will vary depending on state insurance laws and coverage plans. For example, PIP may pay for expenses such as attendant care and rehabilitation that some health plans do not cover, or it may pay up to a certain limit before your health insurance kicks in to cover additional costs.
Another reason to reconsider purchasing personal accident insurance from rental car companies is that it only provides a minor benefit. Alamo, for example, covers up to $2,500 in medical expenses for the renter and passengers.
What Does Your Health Insurance Cover?
Unless specifically stated otherwise, your health insurance will cover medical expenses if you are injured while driving a rental car.
Are you concerned that your health insurance will charge you an exorbitant penalty if you visit an out-of-network hospital's emergency room? Health insurance companies are not allowed to charge higher coinsurance or copayments if you seek emergency care from an out-of-network hospital under the Affordable Care Act.
If you have medical payments or PIP coverage on your personal vehicle, that coverage, combined with a health insurance policy, may provide you with all of the protection you require, even if you rent a car away from home.
What Does Your Home, Condo, or Renters Insurance Cover?
Personal property stolen from a vehicle is covered by some condo, home, and renters insurance policies. Find out if your policy covers your belongings while they are in a vehicle and away from home if you have one of these policies. However, if you rent a car for business purposes, your homeowners or renters policy may not cover your personal or business property. In that case, you should probably get personal-effects insurance.
If you are unsure, contact your insurance agent to learn how your personal auto insurance policy can protect a rented vehicle. Determine whether your policy's endorsements, such as roadside assistance, will apply to your rental. Also, before renting a car, search the rental car agency's website to find its terms and conditions, which may include state-specific coverage information and coverage levels.
Which Coverage Options Might Be Worth It?
Even if your personal auto insurance policy covers a rental car, you may choose to purchase some or all coverages from the rental company. Before declining rental car insurance coverage, consider the following factors.
- If you purchase coverage from the rental car company, you won't have to file a claim with your provider if you have an accident.
- A deductible may not be required for rental car coverage. If your personal policy has a high deductible, it may be worth it to pay a few extra dollars for rental car insurance.
- If you don't have collision and comprehensive coverage, you'll need the loss damage waiver in case the rental car is stolen or damaged.
- Driving an unfamiliar vehicle increases your chances of being involved in a traffic accident, especially if you're exploring a new area. Even if your personal auto policy covers you adequately, purchasing rental car liability insurance increases your protection.
- When renting a car in another country, it's often a good idea to get rental car insurance because some countries will not let you leave until you pay for damage to another person's property.
- When traveling for business, your personal auto insurance policy is unlikely to cover a rental car, and your homeowner's insurance policy may not cover personal property stolen from your rental. If you're going on a business trip, you should consider purchasing rental car insurance.
What Does Your Credit Card Car Rental Insurance Cover?
Some credit card companies provide limited rental car coverage, but you must carefully read the fine print. Typically, you must reserve and pay for your rental vehicle with a credit card, and the cardholder must be listed as the primary driver on the rental contract.
Credit card rental car benefits typically only provide the coverage provided by the LDW. Visa cards, for example, cover physical damage to, theft of, and vandalism of a vehicle, but not injuries, liability, or personal property losses.
Usually, credit card companies offer secondary coverage. For example, if you have auto insurance, Visa will cover your deductible, loss-of-use fees, and towing costs, but you must file a claim with your insurance company to cover damage to the rental car. However, if you decline the rental car company's coverage and do not have a personal car insurance policy, Visa will cover vehicle damage and theft as well.
Alternatives to Car Rental Insurance
If you don't own a car but frequently rent one, you should think about getting a non-owner insurance policy. This type of policy protects the named policyholder regardless of the vehicle they drive. Non-owner policies typically include mandatory coverages such as bodily injury and property damage liability, personal injury protection, and uninsured and underinsured motorist coverage. Non-owner policies, however, do not cover damage to the vehicle you rent, so you must still purchase LDW coverage from the rental agency.
Insurance for Car Sharing Services
Car sharing companies frequently include a certain amount of auto insurance coverage in the rental fee, but this may not be enough protection if you are involved in an accident. Zipcar, for example, includes a standard protection plan in its memberships at no additional cost. But if you have an accident, Zipcar charges you a damage fee of $1,000.
Zipcar members can purchase Plus Protection for $5 per month or $50 per year, which reduces the damage fee to $375, or Premium Protection for $9 per month or $79 per year, which reduces the damage fee to $0. These limited fees are only applicable if the member follows the membership terms and agreements. If you do not follow all of the rules, Zipcar may hold you liable for all damages.