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Rental Car Insurance: The Basics

Credit Card Basics, Credit Cards
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Rental Car Insurance

When renting a car, combing through the fine print of insurance coverage options can be daunting and, let’s face it, not all that stimulating. It’s not as exciting as choosing between a flashy convertible, a sensible compact or the seven-seat mammoth SUV.

You may ask yourself: Do I even need to buy coverage? Won’t my auto insurance cover an accident? What about those credit card benefits for car rentals?

Before you drive your rental car off the lot or book from a car share service, here are a few basics you need to know.

Do I need to buy additional rental car insurance?

You may want to opt into rental car coverage if you don’t have collision coverage or if you don’t have your own auto insurance policy. It’s most beneficial to purchase the rental policy if it doesn’t duplicate the auto coverage you already have.

Rental car insurance can cost up to $50 per day, depending on the level of coverage you choose. There are usually four types of coverage available when you rent a car:

  • A loss-damage waiver, also known as a collision damage waiver, covers you for liability if a car is damaged while you’re renting it. This coverage usually costs anywhere from $9 to $19 per day, but this varies by state, vehicle and rate. For example, if you purchase a collision damage waiver from Alamo, the cost is around $23.99 per day, while Hertz offers its loss-damage waiver for around $38.95 and a collision damage waiver for $29.95. If you’re using your own insurance, your policy may not cover the full value of the vehicle you’ve rented, so you may need a loss-damage waiver. In addition, without a loss-damage waiver, the auto rental company could charge you for loss of use during repairs as well as any towing charges. If your primary insurer does not cover these, you’ll need the waiver.
  • Liability coverage encompasses damage to any property as well as medical expenses for passengers in another vehicle if you’re in a collision. Protection is usually capped at $1 million and may cost about $7 to $15 a day. If you use your own insurance, find out how much liability coverage it provides specifically for rentals. If you don’t have an umbrella policy or the rental’s coverage limit is higher, you’ll be safest with the additional liability protection.
  • Personal accident insurance covers medical costs for you and your passengers in the event of an accident and typically costs around $1 to $5 per day. Even if you already have health insurance, there may be gaps, such as deductibles, that could leave you with higher medical costs after an accident.
  • Personal effects covers valuables you keep in the car in case of theft and costs about $1 to $4 per day. Even if you have auto insurance, it won’t cover what’s inside the car, so you’ll need extra protection.

What do popular car share services cover?

Popular car share services such as ZipCar, RelayRides, GetAround and Car2Go each provide members with insurance. If you want additional protection, check with your insurer or car issuer for their policies on car share services.

  • Zipcar is the world’s largest car sharing service, in which members can choose from a variety of vehicles and pick up their booking at designated locations. It offers comprehensive collision coverage and personal injury protection. It also offers liability coverage of $300,000 per accident. Members are responsible for a $750 damage fee per incident, which can be reduced with an optional damage fee waiver.
  • RelayRides is a peer-to-peer car sharing service available in more than 2,100 cities and 300 airports throughout the United States. It offers three supplemental protection options for renters. The options range from a plan that limits your collision exposure to $500 and gives you $300,000 in liability coverage, to one that offers no vehicle damage protection and only state minimum liability coverage. In addition, if you’re traveling and haven’t yet decided on a car, RelayRides offers the ability to rent cars at dozens of airports across the country.
  • GetAround is another peer-to-peer car sharing service, available only in the San Francisco Bay Area, San Diego, Austin, Portland and Chicago. It gives renters liability coverage up to the limits carried by the vehicle owner or a combined single limit of three times the state minimum, whichever is greater. The company also offers personal injury protection (in states where it is mandated), comprehensive/collision coverage, supplementary medical payments coverage and uninsured and underinsured motorist coverage (in states where it is mandated).
  • Car2Go is a one-way point-to-point smart car rental service. Unlike ZipCar, it enables its customers to access cars wherever they are parked using a smartphone app. It provides liability insurance, uninsured motorist coverage and collision and comprehensive coverage with varying limits and deductibles, according to state. Personal injury protection is offered on a state-by-state basis.

What does auto insurance typically cover?

If you already have an auto insurance policy, you’re usually covered with a traditional rental too. If you don’t own a car and don’t have car insurance, it’s possible to get non-owners auto insurance. Inquire with your standard insurance provider, such as your homeowners insurer, to see what coverage may be available.

If you do have auto insurance that covers a rental, it likely will provide collision and theft or vandalism coverage. Liability usually works the same in a rental car-related claim as if you were driving your regular car. If an accident does happen, make sure to file your insurance claim just as you would if you were driving your primary vehicle.

Your primary policy will likely not cover loss of use, loss of value or other rental fees. Also, most auto insurers won’t cover an accident if you’re using the car for business purposes or driving overseas. Also, if an accident happens while someone else is driving a car you rented under your name, and that person is not listed on the rental car agreement, your claim may be denied. For example, PEMCO explicitly states unless the driver was listed on the policy—not just given arbitrary “permission”—the company won’t provide coverage. The company also will not cover for business purposes or driving overseas.

What can credit cards cover?

You can also use your credit card for secondary rental insurance—and in some cases for primary—to provide coverage that surpasses what your primary auto insurer or a rental company can offer.

If your card offers rental car insurance, it will usually pay for the costs of damages not covered by your regular car insurance policy. In order to receive coverage under your credit card, you have to book the rental car under your name with a credit card with a matching name. Typically you have to refuse coverage offered by the rental car agency to receive insurance coverage from your credit card.

Here are what the most popular card networks cover:

  • Visa offers rental car insurance on all of their cards, but limits their rental car period to 15 days domestically. It includes physical damage, theft and loss of use. To qualify for loss of use, however, the rental company must prove the fleet is fully utilized, meaning most of its cars are in use. It does not cover injury, property damage, taxes, damage to other vehicles, diminished value or tire wear and tear.
  • MasterCard only offers car rental insurance on Platinum, Gold, World and World Elite cards. The rental period is limited to 31 consecutive days and the maximum coverage is $50,000. MasterCard covers the same events and has the same exclusions as Visa.
  • American Express offers free secondary coverage up to $50,000 on all of its basic cards, which covers physical damage and theft. Platinum card holders can also receive coverage up to $75,000 for car rental loss and damage insurance. Basic coverage does not include diminished value, taxes, wear and tear, property damage or injury. Cardholders must decline full rental car insurance, but can accept partial coverage. It also offers primary coverage for a small fee, which adds on property damage and injury as well as an increased coverage of $100,000.
  • Discover limits its coverage to a few of its cards. Most cover collision damage only up to $25,000, though the Discover Escape card covers up to $50,000. It does not cover theft, any damage not due to a collision or loss of use.

Some cards vary what the issuer will and won’t cover, so make sure to review your card’s rental collision policy or contact your issuer prior to renting. Additionally, card networks may exclude protection for certain vehicles.

To avoid last-minute uncertainty when you’re standing at the rental counter, do your research beforehand about different rental companies. Then consult your own auto policy or contact your credit card issuer to find out what sort of coverage may be available to fill any gaps.


Car image via Shutterstock.