Know Which Insurance to Take on a Rental Car

Should you opt for the additional insurance on a rental car? If you have your own auto insurance coverage, you may not need to. Read on...


  1. Know the limitations of your own car insurance. When you rent a car, most private auto insurance companies' coverage (the coverage you have on your own personal automobile) transfers over to the rental vehicle during the time the rental is utilized by you. Call your insurance agency to make sure.
    • If you allow additional drivers who are NOT on your personal auto policy, you run the risk that if those persons are operating the rental, they, and the damages they cause, will not be covered. Ask your insurance company about this.
    • If your policy provides minimum coverage, you may need to compute the value of the loss or damage of a newer vehicle (the rental car) and decide if you need to supplement your coverage. Personal auto policies that extend collision coverage to a rental car may only provide a coverage limit equal to the value of your own vehicle. If the value of your personal vehicle is less than that of the rental vehicle, you could still incur some damage responsibility.
  2. Find out if your credit card company provides any kind of protection. Some credit card companies offer rental car insurance coverage if you use their card to pay for the rental.
    • Ask about the requirements for getting reimbursed. For example, you may not be reimbursed if you don't notify the credit card company within a certain period of time (e.g. 45 days) after the incident.[1]
    • Typically, for credit card insurance to work, the rental car has to be paid in full with that credit card, and you must decline the rental company's collision waiver, and be the primary renter of the car (although additional authorized drivers are also covered).[2]
  3. Check if you're covered under any of the following specific conditions:
    • On a business trip - Some personal auto policies might not cover rentals on business trips.[1] Most insurance companies DO NOT cover any automobile use that involves delivery for business purposes of food, materials, supplies, papers or people.
    • Long-term rentals - Coverage may be limited.[1] Most credit card company plans cover vehicles rented for up to one month.[2]
    • In a foreign country - Coverage may not apply.[1]
    • Certain rental vehicles - Some rental vehicles aren't covered (exotic cars, camper, pickup trucks, etc.)[2]
  4. If you are not covered adequately by your own insurance policy and/or the credit card company, then you might want to consider the rental agency's options - any insurance is better than no insurance. Hindsight is 20/20, and it is always better to pay a nominal amount per day rather than having to pay thousands of dollars over years in a payment plan for property damage, or having liens placed against you for bodily injury damage. There are a few plans that most states are required by law to offer:
    • Collision damage waiver (CDW), also known as "optional vehicle protection" or "loss damage waiver" (LDW). Loss damage waiver means that if the car is damaged for any reason, you can just walk away without any liability. This is true even if your own personal auto policy carries over. This gets you out of paying the deductible that you would normally have to pay under your own car insurance policy, unless the waiver itself has a deductible.
      • costs up to $19/day
      • shifts liability for collision damage from you to the car rental company
      • covers for "loss of use". Loss of use is a fee that is charged by the rental company if your rental car is damaged and is sent out for repair. You would be billed a loss-of-use fee for all damages and repair to the rental car as well as a fee for every day that the vehicle was not able to be rented. That can add up! A loss-of-use fee is not normally covered by personal auto insurance policies.
      • can be voided if you were driving illegally or on unpaved roads
      • If you don't have collision and comprehensive insurance of your own, it's generally a good idea to buy a waiver. There are different levels, dictating how much your responsible for (none of the damage, damage in excess of $500 or $3000, etc.).[3]
    • Liability insurance
      • protects for up to $1 million
      • costs between $7 and $14 a day
      • if you already have an insurance policy, you already have this
      • Most states require rental companies to cover a minimum liability at no cost to you. Check to see what those requirements are in your state, and decide if that is sufficient for you.[3]
    • Personal accident insurance
      • covers medical and ambulance bills for anyone in the car
      • costs $1-5 a day
      • you probably don't need this if you have an existing car insurance policy, or if you (and everyone else in the car) has adequate health insurance coverage
    • Personal effects coverage
      • covers theft of items in vehicle
      • costs $1-4 a day
      • an alternative is to buy a floating policy under home or renters insurance so valuable items are fully protected wherever you go


  • If you don't own a car or you rent cars very often, you should ask your insurance agent about buying a non-owner liability policy. It can provide ample coverage for multiple rentals and may prove to be a better bargain than the Damage Waivers offered by the rental companies.. But keep in mind, if you cause damage to your rental vehicle it will cause your regular car insurance premium to increase.
  • If you get into an accident in a rental car and your personal auto policy transfers over to the rental (which most auto policies nationwide do) then the extra insurance you buy from the rental agent is considered EXCESS to your own personal auto policy. This means that your policy will pay out first, and any damages above your policy limits will be covered by the rental carrier. This is with the exception of collision on the rental car. For those damages, you will pay your deductible to repair the rental, and your carrier will pay the remainder. The only way that you are excused from this is if the other party is at fault OR you opted for the additional insurance, because that additional insurance covers damages to the rental car, but not for the property damage of others unless it is in an EXCESS capacity.
  • When renting a car abroad, you may be asked to prove that you are insured on the rental car, or else you'll be required to pay a large daily insurance premium. Check into this before you travel and consider getting temporary insurance for your trip. (For example, AMEX provides this to cardholders for a fee.)


  • Read the fine print of your card agreement. More than likely, their coverage is only secondary. This means that after you pay out of your own pockets for damage, then you can try to collect from Master Card or AMEX. They are not in business to give away money, so you will most likely not get anything from them. (But the marketing makes you feel confident.)If your credit card does cover some damages, they will either take a pro rata (apportioned) amount of the damages along with the rental agency ABOVE AND EXCESS to your policy limits, or they will say that they cover anything beyond what isn't paid by the other two entities.
  • Liability Insurance Supplement means that if you are at fault and hit another car, the agency pays all damages to the injured party (you know, the one you hit). THIS IS ONLY IN EXCESS TO YOUR OWN AUTO POLICY LIABILITY COVERAGE!
  • Often, credit card coverage for insurance is only given to the cardholder. It may not include the cardholder's spouse (if they were the ones driving the rental car).

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