Do I Need Rental Car Insurance?

Before you purchase rental car insurance from the rental company directly, make sure you’re making the most of the insurance coverage you already have.

Written by Jacqui Kenyon / February 2, 2022

Quick Bites

  • The auto insurance you have for your own car and the credit card you use to pay for your rental car could provide coverage for the rental.
  • The type or amount of coverage you get through your own auto insurance or a credit card may not be adequate, though.
  • Car rental companies often charge a high rate for “loss of use” or when the car is out of commission, so you’ll want to be sure to have coverage for that.
  • Full-coverage insurance from a car rental company could easily add $40 a day to your bill.

Renting a car can open up a ton of possibilities when you’re traveling—it gives you the opportunity to explore neighborhoods, restaurants and other sights that you wouldn’t be able to reach on foot or via public transportation. If you’re visiting a locale where most people drive to get around, like most of the U.S., renting a car allows you to experience your destination like a local.

One of the only cons of renting a car is the cost—especially recently. Rental car prices skyrocketed during the pandemic, and some experts predict that rates won’t go down significantly until 2023.[1]

Sticker shock at the price of your next rental car may tempt you to say, “No thanks,” when the associate asks if you’d like to purchase rental car insurance. Opting into full-coverage insurance through the rental car company can easily cost an additional $40 per day or more.[2]

However, if you decide to skip insurance, and you’re involved in an accident, theft or other issue, you might regret that choice. One study found that rental cars are involved in more collisions than personal cars, so it’s a good idea to make sure you’re covered.[3]

But that coverage doesn’t necessarily have to come through the car rental company. If you own a car at home or have a credit card with travel perks, you may already have a certain amount of rental car insurance coverage before you even collect the keys.

“Before you enter an agreement with any type of rental service, maximize use of the insurance you’re already paying for and avoid paying for duplicate insurance,” says Loretta Worters, vice president at The Insurance Information Institute.

Here’s what you need to know about rental car insurance before your next trip.

Inside this article

  1. If you own a car with insurance
  2. If you use a credit card
  3. If you lack coverage
  4. Read your policies

If you own a car with insurance at home

If you drive an insured car at home, you may not have to buy car rental insurance.

“In most cases, whatever auto insurance and deductibles you have on your own car would apply when you rent a car,” says Worters. The exception is if you use your car for business. In that case, your personal auto policy may not apply, and you’ll want to ask your employer whether they have insurance that covers your rental.[4]

If you’re going to rely on your own auto policy to cover any damages after an accident in a rental car, you’re going to want to make sure that it’s full coverage. Typically, that means that you have car liability coverage, collision coverage and comprehensive coverage.

Some people choose to opt out of collision and/or comprehensive coverage, particularly if they have an older car that’s not worth much money. If you’re in that boat, be wary of relying on your own auto policy when you rent a car.

“If you dropped these coverages on your own car as a way to save money on your car insurance, you may not be covered if your rental car is stolen or damaged,” Worters says. Don’t make any assumptions about what your auto policy covers—read the fine print to see what coverage extends to rental cars.

Tip: There are certain rental car expenses that your auto insurance may not cover, like towing charges for a damaged rental car or administrative fees after an accident, says Loretta Worters, vice president at The Insurance Information Institute.

If you have a travel credit card that includes rental car insurance

Many credit cards, especially travel credit cards, offer rental car insurance coverage as a benefit to cardholders free of charge. But whether it’s enough to waive coverage at the rental desk will depend on several factors.

“Contact the credit card issuer to find out what they cover,” Worters says. “If you are depending on a credit card for insurance protection, ask the company or bank that issued the card to send you their coverage information in writing.”

The type and value of the rental car insurance coverage is going to vary based on the car issuer as well as the status of the card. “For example, a platinum card may offer more robust coverage than a green card,” Worters says. “If you have more than one card, you may want to compare what insurance they offer for car renters.”

One important thing to note about credit card rental car insurance benefits is that they’re usually secondary, Worters says. “That is, they will kick in after your personal insurance policy or the insurance coverage offered by the rental car company are utilized.”

Tip: There are credit cards out there that offer primary coverage—meaning that your auto insurance company never gets involved—but just make sure you know which type you have before you make any rental car insurance decision.

If you’re relying on a credit card for your rental car insurance, make sure the way you use the card doesn’t affect the coverage you’re counting on: “You may also want to ask about and consider when you use reward points on a credit card versus the actual direct use of the card,” John J. Crosby, a certified financial planner and managing director of Individual Financial Services, LLC, says. These two uses may have different implications for rental car insurance coverage.

If you don’t have coverage through your own auto policy or a credit card

If you don’t own a car or use a credit card with rental car insurance benefits, you will most likely want to buy coverage through the rental car company or a third-party insurance company.

The rental car company will be on the hook for that state’s minimum coverage amounts, which might look like $25,000/$50,000/$25,000. That means $25,000 of coverage for bodily injury per person in an accident, $50,000 for bodily injury per accident (in case multiple people are injured), and $25,000 for property damage.

But state minimums only apply to liability, so this baseline coverage the rental company provides will only apply to damage to the other party in an accident where you are at fault. Any damage to your (rental) car or injuries you sustain in an accident will not be covered.[4]

In addition to liability coverage, you’ll probably want to obtain additional insurance through the rental car company.

Worters says that rental car companies generally offer four types of coverage:

  • A loss damage waiver (LDW)

    “An LDW is not technically an insurance product—it is designed to relieve or “waive” renters of financial responsibility if their rental car is damaged or stolen,” Worters says. In many cases, LDWs also cover “loss of use.”

    Rental car companies often charge a high rate for loss of use of the car that was damaged while in your care, since they cannot rent it out to others while it’s being repaired. An LDW covers what sufficient collision and comprehensive coverage on a personal auto policy would cover if you had auto insurance.

  • Liability insurance

    Liability insurance provides coverage beyond the state minimums for damage and injuries to others in an accident that you caused. But state limits are low and may not completely cover damage from even a relatively minor accident, so you may want to increase your coverage amounts with additional liability insurance. ​​”Non-car owners who are frequent renters have the option of purchasing what’s called a non-owner liability policy, which can provide the additional liability needed,” Worters says.

  • Personal accident insurance

    Personal accident insurance covers you and your passengers’ medical expenses in case of an accident.[5] Worters says that your health insurance and/or personal injury protection on your auto insurance policy may cover these expenses, so do your due diligence before opting in.

  • Personal effects coverage

    This coverage protects you if your personal belongings are stolen from a rental car, Worters says. But if you have homeowners or renters insurance, your policy may cover theft when you’re outside of your home, so check out your policy before purchasing additional coverage.

Tip: If you know about your trip in advance, there are also third-party options for purchasing rental car insurance, like Allianz and Bonzah. These can be more affordable than purchasing insurance through the rental car company, though what they cover varies.

Whatever you decide, the first step is to read your policies

Crosby says that many people decide to pay rental car insurance coverage out of a lack of knowledge—and a lack of desire to deal with it. “That could be a costly mistake,” he says.

Calling up your auto insurance provider and/or credit card is a 20- to 30-minute investment that could save you hundreds of dollars per trip, he says.

Article Sources
  1. Sebastian Blanco, “High Rental Car Prices Expected to Last Until 2022, at Least,” Car and Driver, Oct. 9, 2021, https://www.caranddriver.com/news/a37913994/high-rental-car-prices-until-2022-future.
  2. Anna Swartz and Stephanie Nieves, “What is rental car insurance?” Policygenius, Oct. 22, 2021, https://www.policygenius.com/auto-insurance/learn/rental-car-insurance.
  3. Richard Tay and Jaisung Choi, “Differences in Rental and Nonrental Car Crashes,” Journal of Advanced Transportation, July 4, 2017, https://www.hindawi.com/journals/jat/2017/8757891.
  4. “Is Rental Car Insurance Worth It?” Marketwatch, https://www.marketwatch.com/picks/guides/insurance/rental-car-insurance.
  5. “The Four Types of Rental Car Insurance, Explained,” Allianz, https://www.allianztravelinsurance.com/travel/rental-cars/rental-car-insurance-explained.htm.

About the Author

Jacqui Kenyon

Jacqui Kenyon

Jacqui Kenyon is a writer and editor, ghostwriter, editorial consultant and media coach based in Brooklyn, NY. Her work has appeared in Business Insider, Forbes, The Daily Beast, Rate.com, Fabric, and more.

Full bio

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