Rental Car Insurance Coverage: Do You Need it?
By time you land at the airport after a long flight, make your way through the airport and grab your bags, hop on a shuttle to get a car rental office, and get faced with a series of questions and paperwork, you're exhausted and just want to start your trip.
The question comes up: Would you like the car rental insurance for just X amount of dollars or would you like to waive it? You want to save money and you wonder if your auto insurance policy covers rental cars. The agent tells you “accidents happen” and you don’t want to be liable for a car you’re renting. You just want your rental agreement and in the rush to get away and to have some peace of mind, you may opt to buy it without really thinking about the extra cost of $10 to $45 per day. But do you need rental car insurance?
Few impulse buys at the cash register turn out to be smart ones. Long before you get to that counter, it can be worthwhile to check your insurance options to see if you already have coverage elsewhere and what exactly the rental company offers.
Here are some things to find out long before you get to the car rental desk.
- How much does rental car insurance cost?
- A card’s insurance may not travel the world
- Additional coverage
- The risks of not having insurance
- Bottom line
What does rental car insurance cover?
A rental company’s coverage can make sense, but first you need to understand what it’s offering and how it compares to what your personal auto insurance covers.
Here are some of the types of rental car insurance that may be offered:
Loss damage waiver
Also called a collision damage waiver, or CDW or LDW for short, a loss damage waiver is the main type of insurance a car rental company will push. It’s technically not an insurance policy. Instead, it waives your financial responsibility for loss or damage, unless you’re speeding, driving off-road, or otherwise violating the contract.
One advantage of buying an LDW through a rental car company is that it speeds up the process of filing insurance claims. Instead of dealing with your personal insurance company, you could just leave the car with the rental company and walk away.
However, and you knew this was coming, the auto insurance you have for your personal car at home may already cover you. Comprehensive and collision insurance covers the same things LDWs do, making an LDW unnecessary for most people. But if you’ve dropped collision or comprehensive coverage from your personal policy, then you may want to buy one from the rental company.
One thing that LDWs do cover that your regular insurance won’t is “loss of use.” This is lost rental income to the company while the car is being repaired. Your own auto policy usually won’t cover this, though the closest you may get is money to rent a car while your damaged car is in the shop.
A car rental company may also try to sell you liability insurance to cover someone injured or property damage in an accident. If you have liability coverage on your personal car, you won’t need this.
But if you don’t have enough liability insurance through your auto insurer, then you may want to buy extra coverage. Experts suggest you have at least $500,000 worth of liability and that it covers both bodily damage and personal property damage. You can buy it through the rental agency or your own insurance company if you need more.
Personal effects coverage
Personal effects covers personal items stolen from the rental car. Leave your laptop or coat in a car and someone breaks in and steals it? Personal effects coverage will pay for it.
But you may already have this in your renters or homeowners insurance as both often cover “off-premises” coverage for a rental car, so be sure to check your policy.
Personal accident coverage
This can be a scary one to hear about at the car rental counter: Personal accident coverage covers medical bills for you and any passengers in your car in an accident.
This, too, is already covered in your car insurance policy at home if you have medical payments coverage or personal injury protection. Check with your insurer on the amount covered to see how it compares to what the rental company offers.
How much does rental car insurance cost?
Each of the types of insurance listed above can be bought separately so you can add-on what you need and a week’s trip can cost more in insurance add-ons than in rental fees. Buying insurance from a rental company adds about 12% to the cost of a rental car, according to U.S. News & World Report.
Just where do they get you?
An LDW is the most common type of insurance purchased and ranges from $10 to $30 per day, depending on the vehicle and rental company, according to U.S. News. Hertz, for example, charges $45 per day for LDW — that could be more than you are paying per day on the vehicle!
Hertz doesn’t list how much a collision damage waiver, or CDW, costs daily, but it does share how much CDW deductibles are that customers must pay before the CDW insurance takes effect. These range from $800 for a Chevrolet Matiz or similar car, to $4,000 for a Chevrolet Suburban or similar vehicle — both higher than standard insurance deductibles.
The car rental comparison site VroomVroomVroom found that Enterprise charges $3 to $7 per day for personal accident insurance and personal effects coverage, and $12 to $17 daily for a damage waiver.
For other types of coverage, expect car rental companies to charge:
- Liability coverage: $7 to 15 daily.
- Personal effects: $1 to $4 daily
- Personal accident insurance: $1 to $5 daily.
Covering any gaps
When comparing your personal auto insurance to rental car insurance, be sure to look for gaps in coverage and figure out a way to have them covered. Here are two of them:
The biggest gap will likely be in the amount of dollar coverage to protect you from liability. Liability coverage protects you if you injure someone or damage their property while driving. It helps pay for someone’s medical bills or damage to another person’s property if you cause an accident.
Let's say you own a home valued at $1 million. Should you get sued due to an accident, you may want $1 million in liability coverage to protect your home from being taken in a lawsuit.
Assuming that you have enough liability coverage through your personal insurance, then you probably don’t need to buy extra liability insurance from a rental car company. Ask your insurance agent for advice long before you get to the rental counter.
Collision and comprehensive coverage
A potential coverage gap is if you’ve dropped collision or comprehensive coverage from your personal policy. Without it, you’d be liable for an accident such as something hitting your car, or something you can’t control such as a deer hitting your car.
Drivers sometimes drop these if their car’s value has dropped so much that the insurance isn’t worthwhile. For example, a car worth $3,000 that has a $500 deductible would only net you $2,500 in a collision claim if your car was totaled. That won’t buy you much of a car.
But if you are renting a vehicle, more often than not you are driving a brand-new car that has much more value. Without collison and comprehensive coverage, you'll pay for damage you may want to buy a CDW from your rental company.
Reasons to buy rental car insurance
There are other reasons you may want to consider rental car insurance. These include:
You have a high deductible
If your personal insurance has a high deductible, it may be worth it to buy a rental car insurer’s coverage. If your deductible is $1,000 and you get into a fender bender in a rental car, would you rather pay that $1,000 or select the insurance from the rental agency that could run $40 per day? Yes, it can add up, but if you cause an accident, it could be cheaper than paying a $1,000 or higher deductible on your private car insurance.
You’re traveling abroad
Most insurance policies for your personal car carry over to rental cars, but not if you’re driving the rental car in another country. Canada may be covered by your current car insurance in the United States, but don’t expect driving in Mexico or anywhere else to be covered.
Check your policy before flying overseas, or even just driving across the border into Mexico.
Some countries require proof of insurance and coverage for the cost of totalling a rental car, such as in Ireland. If you don't have it and choose to forgo insurance, they can even put a hold on your credit card for the full coverage of totalling a car.
Your at-home car doesn't hold much value
A rental company’s LDW may cover the diminished value of a rental car that has been in an accident. You’re unlikely to find this kind of insurance elsewhere.
Having diminished value coverage means you won’t have to pay for a reduction in the car’s resale price after an accident. This could be thousands of dollars.
The insurer of your primary policy will only pay the value of your car, not the rental car that’s damaged. So if your car is old and isn’t worth as much as the new rental car is, you’ll have to pay that financial gap. That could be enough incentive to get you to buy a rental agency’s LDW or CDW.
An LDW may also be worth buying at the rental counter if you’re renting a luxury vehicle, large truck, RV or motorcycle. Such vehicles normally aren’t covered by your existing policy or credit card agreement. Rental car companies may require renters to have their own insurance for such cars, or to buy a CDW from them.
Check your credit card
Think you need all of this coverage? Think again. You may already get the same insurance that a rental company offers just by booking the rental car with your credit card. Many credit card companies offer auto rental collision damage waivers when using their cards.
Credit card coverage can be enough to let you decline the supplemental coverage at the counter.
But don’t expect credit card issuers to cover everything, or to be the only insurance you’ll need if you get in an accident in a rental car. There are exclusions.
Credit cards typically provide secondary insurance, meaning they step in to provide coverage after your auto insurance pays for whatever it covers you for.
Which credit cards provide extra coverage?
Visa covers theft or damage that isn’t covered by regular insurance plans. Visa also covers loss of use. Visa’s CDW benefit can only be used for rentals up to 15 days in the country where you live, and up to 31 consecutive days outside of it.
Visa has a long list of what it doesn’t cover, including personal liability protection, personal belongings, and injury or damage to anyone or anything inside or outside the rental vehicle.
Visa is typical of credit cards by not providing insurance for expensive and exotic car rentals. These include renting a Ferrari, DeLorean, Lamborghini, Porsche, and other luxury cars.
MasterCard provides up to $50,000 in coverage, meaning the rental car can’t have an MSRP above that figure. Rental coverage is provided for up to 15 consecutive days.
It basically offers the same insurance as Visa.
American Express has details on its website for each of the many cards it has and how its car rental insurance works.
It offers free secondary coverage on all of its cards. This goes up to $50,000 on its basic cards and $75,000 for platinum card holders.
Full collision damage waiver or similar coverage offered by the rental company must be declined at the counter to activate these benefits. Some partial types of coverage from a rental company may be allowed, so check your card’s rules before going on your trip.
American Express also sells car rental insurance at a flat rate for up to 42 consecutive days of coverage. Buyers pay $20 or $25 per rental period, and they only pay when renting with an enrolled card. The coverage is primarily for theft and damage to a rented vehicle, and doesn't require paying a policy deductible.
This extra coverage is higher than what American Express customers get with their free coverage. It allows up to $100,000 of primary coverage for the damage or theft of a rental vehicle, and the same amount in accidental death or dismemberment coverage.
A card’s insurance may not travel the world
Just because your credit card is accepted around the world, it doesn’t mean the auto insurance it offers on rental cars goes with you everywhere.
Visa and MasterCard benefits don’t extend to autos rented in Israel, Jamaica, the Republic of Ireland, or Northern Ireland.
American Express excludes rentals in Australia, Italy, New Zealand and any country on the Office of Foreign Assets Control sanctioned country list. The list is updated periodically and includes countries you’d expect on it, such as Iran, Iraq, North Korea and Syria.
Don't overlook your health insurance. It should cover any medical costs you need to pay for your health needs, negating the need to buy personal accident insurance from a rental agency. However, don’t expect your health insurance to pay the medical bills of other people involved in an accident.
If something in your rental car is stolen, your homeowners or renter’s insurance may cover that loss. Check your policy to know before you go.
Places to buy rental insurance
If your primary auto insurance or credit card don’t offer enough rental car insurance, you don't have to go with the rental car agency. You can buy it a lot cheaper elsewhere. Instead of paying $30 or so per day for insurance from a rental company, a standalone policy can cost $6 or so. Here are some options:
Insure My Rental Car
Insure My Rental Car provides up to $100,000 in rental car coverage and has no deductible for damage. Its policies are also valid outside of the U.S. Insure My Rental Car doesn’t offer liability insurance; it only covers the rented vehicle.
It sells up to $100,000 in CDW/LDW coverage for as little at $6 per day. An annual policy is also available and can be used as many times as necessary within 12 months, though no single car rental period can exceed 31 days.
Another option is Allianz Travel. It provides primary coverage for covered collision, loss and damage up to $40,000, and 24-hour emergency assistance for $9 per day. The benefits don’t require using your personal car insurance policy.
Its coverage also includes luxury rental cars, so you can rent that Lamborghini you’ve always dreamed about driving.
Starting at $8 per day, Bonzah offers up to $35,000 in rental car damage coverage. It covers any damage from any cause not in your control.
What’s not in your control when driving? More than you may think. Bonzah’s list includes collision, theft, vandalism, windstorm, fire, and flood.
Other coverage it offers include:
- Supplemental liability insurance up to $1 million in the U.S. and Canada.
- Up to $500 for baggage and personal items lost, damaged or stolen.
- Zero deductible.
- Cancellation within 10 days of purchase if a claim hasn’t been filed or you haven’t left on your trip.
Sure provides up to $100,000 of coverage for theft or damage, starting at $8 per day. It also covers smaller problems:
- Lost key reimbursement.
- Flat tire expenses.
- Towing charges.
- Charges to drain and clean a gas tank if you accidentally pumped in the wrong kind of gas and damaged the car.
The risks of not having insurance
Not having any type of auto insurance when you rent a car, such as your primary policy at home, isn’t allowed. You won’t be able to rent a car without insurance.
If you don’t own a car or don’t have insurance at all, then you’ll need to buy it from a rental car company or somewhere else. Without it you could have some huge expenses if you hit someone or damage their car or the rental.
But let’s assume you have insurance on your personal car. That should carry over to a rental car.
Not buying more insurance from the rental car company could leave you exposed to coverage gaps, as listed earlier. You may not have enough liability or collision coverage, for example.
But instead of buying it at the rental counter, it might be easier (and cheaper) to fill in those gaps by increasing your coverage through the insurance you’re already paying for on your personal car. Call your insurance company and ask how much it costs to add coverage. It’s often not much, and will cover your personal vehicle year-round and the occasional rental car.
At the minimum you may want to increase your liability coverage. The rental car company doesn’t cover your liability, so having enough of this type of insurance is important. In 2019, the average auto liability claim for property damage was $4,525, while the average claim for bodily injury was $18,417, according to the Insurance Information Institute.
The point of insurance is to limit your financial risk. That’s the equation you want to do before getting to the car rental counter.
In fact, you should do it long before you get to your travel destination. Check the auto insurance coverage you already have, through your primary insurer, your credit cards, and your health insurance.
Look for coverage gaps and get them covered if you don’t want to take that risk. Buying rental car insurance elsewhere, such as from an online company or travel business, can be a lot cheaper than it is from a rental car company.
The point is there are more options than what you’re being rushed to try to understand after arriving in an unfamiliar city in a busy airport. Take your time and you’ll likely save some money.