Last Updated on September 13, 2021 by Jim Ferri
Estimated reading time: 9 minutes
(Updated for 2021)
By Jim Ferri
Should I get insurance when renting a car? It’s one of those things that confuses many travelers. You’re about to rent a car, and the rental agent asks you if you want to purchase insurance. And, like many people, you’re just not sure.
It’s happens to most of us, and we’re not alone. A survey conducted by the National Association of Insurance Commissioners found that 20% of consumers always buy supplemental insurance. Another 20% occasionally do, and 62% don’t believe their personal auto insurance automatically covers rental cars.
All this confusion is due to lack of knowledge about your auto insurance. Or you may just have the wrong information.
For several years, I rented cars in Europe believing I had insurance coverage when, in fact, I didn’t. I’m certainly glad I never got into an accident. But now – during a recent drive about Sicily, for example – I always check my insurance cover in advance.
Planning is always critical when renting a car for any type of road trip. If you don’t have some type of insurance, you expose yourself to considerable financial risk. If you are in an accident without insurance coverage you can be liable for many thousands, or millions, of dollars.
Sometimes you need to purchase insurance, other times you don’t. You never know unless you do your homework.
Here’s an overview of what you need to know.
Types of Insurance for Rental Cars
Generally speaking, there are three types of insurance you should know about when renting a car:
- Collision/Damage Waiver (sometimes called CDW, LDW or DW): this is not really insurance but a waiver in which the rental company agrees not to make a claim against you if your rental is stolen or damaged. It usually excludes various conditions, such as driving while impaired or driving outside a defined area or country. These costs can vary significantly.
- Liability Insurance: it protects you if you damage someone else’s property or vehicle. It is usually in a specified amount such as $1 million.
- Personal Property / Effects Insurance: it covers your personal property if stolen from the rental car or damaged in an accident.
CDW prices can be outrageous, and rental agents must often push them since it’s such a moneymaker for the company. They can cost anywhere from $15 – $30 per day, depending on the car, the company from which you’re renting, and the location where you’re renting the vehicle.
Does Your Personal Auto Insurance Protect You?
For most of us, the collision insurance we carry on our private vehicles also covers rental cars, at least in the U.S. and Canada. Thus, you can usually skip this coverage when you rent, but you should check with your insurance company in advance.
- Important to Know: the big caveat, however, is that most times your personal auto insurance does not cover vehicles rented outside the U.S. and Canada. Again, call your insurance company (or check its website) to find out in which countries your policy provides coverage. You may need to buy insurance for your rental car.
Even in the U.S. or Canada, though, your personal auto insurance may not cover what is called “loss of use” charges. That’s the amount the rental agency claims to lose from fees while the vehicle is in the repair shop. It is, however, sometimes covered under collision damage waiver (CDW) or loss damage waiver (LDW).
- Important to Know: Be aware that if you are involved in an accident in a rental and are covered by your personal insurance, inflated damage fees might cause your insurance premiums to go up in the future.
Rental-Car Insurance Provided by Your Credit Cards
All four major card networks (Visa, MasterCard, Discover and American Express) provide some form of rental car insurance coverage. MasterCard, however, does not provide coverage to all its cardholders.
This is usually “secondary insurance,” so-called because it only kicks in after your primary insurance (i.e., your personal auto insurance or another policy you’ve purchased) has paid various costs to the rental agency. Many, but not all, credit cards provide “loss of use” coverage when you rent using their card.
- Important to Know: Coverage varies not only by credit card but also by state. You need to check with each of your credit card companies to find out what coverage each provides. Coverage can vary greatly between cards so ascertain which offers the best coverage. Then be sure to use only that card when you rent a car. You’ll find a good credit-card benefits side-by-side comparison chart on CardHub.
In its 2015 study on the best credit card coverage for rental cars, CardHub found that American Express and Visa provide the best rental car insurance policies, both attaining scores of 87%, followed closely by Discover (85%) and MasterCard (77%). Be aware that MasterCard is the only company that does not provide coverage on all its cards. (In Card Hub’s 2012 study, originally quoted in this article, VISA received the highest cumulative score. It was followed in order by Discover, American Express, and MasterCard).
Rental-Car Insurance Is Confusing
You may find all of this confusing and you have a lot of company. The National Association of Insurance Commissioners says 62% of consumers don’t believe their personal auto insurance automatically covers rental cars. Additionally, 24% aren’t sure whether their credit cards provide any sort of coverage either.
- Important to Know: All four card companies require that you charge the entire rental car purchase on their credit card. You must also decline supplemental insurance/Collision Damage Waivers (CDW) offered by the rental company to be eligible. None provides coverage for the rental of exotic, expensive, or antique cars; trucks; vehicles with open beds; or off-road vehicles. VISA and MasterCard only cover accidents occurring on dirt and gravel roads if a municipality regularly maintains them. American Express will not provide coverage for renting certain popular SUVs.
American Express offers one of the better insurance programs. Its Premium Car Rental Protection program provides primary insurance protection on a rental car. Coverage is up to $75,000 coverage ($100,000 with its Platinum card) for damage or theft. Since it’s primary insurance, there’s no need to file a claim with your personal insurance company. Thus, your auto insurance premiums will never be affected if you have an accident in a rental car.
The cost is also comparatively low – a flat rate of $12.25 / $24.95 per rental for up to 42 consecutive days. Enroll in the program and you will be automatically insured whenever you use any of your Amex cards for a rental.
Allianz Travel Insurance also provides car rental insurance. Its Rental Car Damage Protector provides collision loss/damage coverage up to $40,000 for $9 per calendar day.
- Important to Know: the American Express Premium Car Rental Protection does not cover vehicles rented in Australia, Ireland, Israel, Italy, Jamaica and New Zealand.
Keep in mind also that associations such as the AAA, AARP, etc. sometimes provide rental-car insurance. If you’re a member of an association, contact them to ascertain your benefits. It’s a call that can save you money when you’re traveling.
Four Other Good Things to Know About Rental-Car Insurance
- A good thing to do is always to inspect any rental vehicle before you leave the rental facility. Make the rental agent note even the most minor damage or scratches on your rental form. Also, take a picture of it with your smartphone with the rental facility in the background. If, on return, the agency claims you’re responsible for the damage, you have proof that you’re not.
- If you’re renting overseas, always get an English version of the contract, which you typically do in advance, usually online. After all, if it’s in a foreign language and you could be accepting all sorts of liabilities and additional charges. It has happened.
- Rental agencies usually charge you a “loss of use” administration fee. They claim, rightfully so in most cases, the resale value of the car is lower after an accident. Some insurance companies will not pay extra fees such as this, so it’s wise to check with your own company.
- To be covered by your card for rental insurance, you must have that rental billed to that card. If you have a coupon for a free rental or if you’re renting with frequent flyer points, it’s more complicated. Be aware that even though you provide the credit card number at the time of rental to hold the reservation, if no charges are made to the card by the rental company you may not be covered by the card company’s insurance.