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Credit Card Rental Car Insurance Benefit Comes With Caveats

Credit Card Basics, Credit Cards
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credit card car rental insurance

Rental car insurance, which isn’t included in the advertised price, can more than double your daily rate for a vehicle, turning a great deal into a poor one faster than you can say “fill ‘er up.”

Here’s where your credit card company can come to the rescue. Card issuers typically offer this insurance as a benefit to card holders, for free.

Car-rental companies typically offer collision damage waiver, insurance that covers repairs to the vehicle if you get in an accident or the car is otherwise damaged.  They may also offer basic liability coverage, which covers you and others involved in a crash as well as property damage when you’re at fault.

Depending on how long you’re renting a car, using your credit card’s coverage in lieu of the car-rental company’s collision damage waiver could save  you hundreds of dollars. Decline coverage from the car-rental company, and you’re covered if you charge the rental to your card — and if your card company supplies that coverage.

But this perk comes with some important caveats. Consider the following when renting a car:

The insurance is likely secondary

Most credit cards offer secondary insurance, meaning it will cover only what your primary car insurance provider won’t. If you have secondary insurance:

  • It can be a hassle. You’ll have to file claims with your primary car insurance company and the credit card’s insurance company. Managing one insurance claim can be stressful enough, so adding a second might be more than you want to handle.
  • It can cost you. When filing a claim with your primary car insurance provider, you’ll likely have to pay a deductible, and the company may increase your premium. Those changes could cost you more in the long term than what you saved when you declined the car-rental company’s CDW.

Some cards offer primary rental car insurance, however, including this one and this one. American Express also offers primary rental car insurance for a flat rate per rental period, which can be much cheaper than what the car-rental company offers.

» MORE: Rental Car Insurance: Which Credit Cards Have You Covered

Limitations

Credit card car rental insurance usually comes with limitations that could leave you without coverage. Limitations and exclusions may include:

  • The length of the rental period
  • Liability, property damage, injury coverage and other things that are typically taken care of with full coverage
  • Expensive and exotic cars or certain other vehicles
  • Use of the car outside the U.S. or in certain parts of the country, including off-road.

Credit card rental car insurance also caps how much it will cover. If the damage exceeds that cap, you may end up paying the difference out of pocket. Be sure to read the terms and conditions of your insurance coverage. 

You may not have the coverage

It’s required by law to have a car insurance policy with at least liability coverage if you own a car. Furthermore, creditors typically require you to have collision coverage on the policy if you’re leasing or financing your car.

But if you own your car and you’ve opted out of collision coverage, or you don’t own a car and don’t have any primary car insurance at all, your credit card’s policy may not cover the full damage of an accident.

Generally, you’ll have to at least buy the primary insurance if you don’t have an auto policy already. Otherwise, you could be on the hook for possibly hundreds of thousands of dollars if you have an accident in which you’re at fault.

Not all cards offer it

The vast majority of credit cards offer rental-car insurance, but it would be unwise to assume yours does without double-checking. Check out the Nerds’ comprehensive review of credit cards that offer rental car insurance to make sure your card is on the list.

The bottom line

Purchasing insurance from the car-rental company will run up your bill, but using credit card coverage also has its risks.  If you want to avoid the upfront cost and are willing to take on those risks, stick with the insurance your credit card offers. After all, you are no more likely to get into an accident on vacation than you are at home, unless you’re going to some exotic locale with winding roads and cliffs.

On the other hand, if you want to walk away with no hassles no matter what happens during your rental, getting the rental company’s CDW or using a credit card with full insurance is the way to go. You’ll also be off the hook for loss of use charges; many rental companies charge you the full rate for each day they are unable to rent the vehicle because it’s being repaired.

Ben Luthi is a staff writer at NerdWallet, a personal finance website. Email:bluthi@nerdwallet.com. Twitter: @benluthi.


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