When You Need To Buy Rental Car Insurance

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Rental car companies typically offer four types of coverage: rental car liability insurance, the collision damage waiver (CDW), personal accident insurance and personal effects coverage. Each of these coverages are often covered by other insurance policies you may already hold. When deciding whether to buy rental car insurance, you'll only need to buy the coverages you don't already have.

If you have a personal auto insurance policy, it likely covers many of these additional rental car insurance coverages, particularly rental car liability insurance, the collision damage waiver and personal accident insurance. If you have homeowners or renters insurance, these policies can sometimes substitute personal effects coverage. And health insurance policies often provide coverage that's similar to personal accident insurance. Several credit cards also provide some amount of comprehensive and collision insurance, in which case purchasing the collision damage waiver may be unnecessary.

This guide explores the various coverages offered by rental car companies and when it could make sense to purchase them.

What is rental car insurance?

There are four main types of rental car insurance offered by rental car companies.

  • Rental car liability insurance, often known as supplemental liability insurance (SLI), increases your liability coverage relative to your existing plan and helps protect you from damages filed by a third party in an accident.
  • Collision damage waiver (CDW), sometimes referred to as rental car collision insurance, protects you after theft, an accident or some other event that causes damage to the car.
  • Personal accident insurance covers medical and death-related expenses if you or any of your passengers are injured in an accident.
  • Personal effects coverage provides compensation or reimbursement for any personal property stolen from the rental car.

When do I need rental car insurance?

In many cases, your personal auto insurance policy covers rental cars. You should always read your policy or contact your provider to confirm your coverage.

A full-coverage insurance policy will provide many coverages similar the extra services offered by your rental car company — such as supplemental liability insurance, the collision damage waiver and personal accident insurance — up to your policy limits. While these coverages generally apply to cars rented for personal use, they may not extend to vehicles rented for business purposes.

You may need personal accident insurance if you don't have health insurance, or if your policy imposes limits or a high deductible. Similarly, personal effects coverage is well-suited for people who don't have homeowners or renters insurance and feel there's risk of theft during their trip.

Some credit cards also offer some amount of rental car insurance, usually comprehensive and collision insurance, so check with your credit card issuer. If it doesn't offer any coverage, then it may be worth it to get some form of rental car insurance.

Rental car insurance coveragesYou may consider declining if…
Rental car liability insurance...you have sufficient liability insurance through your auto insurance policy.
Collision damage waiver...you have sufficient comprehensive and collision insurance through your auto insurance policy.
Personal accident insurance...you have sufficient personal injury protection (PIP) through your auto insurance policy and/or health insurance.
Personal effects coverage...you have homeowners or renters insurance that covers theft of personal property.

Below, we further explore when you should get rental car liability insurance, the collision damage waiver, personal accident insurance or personal effects coverage.

When to get rental car liability insurance

If your current auto insurance policy has liability insurance, which is required in most states, purchasing supplemental liability insurance (SLI) may not be necessary. You should check your coverage limits to ensure you are comfortable with the amount, as these limits will determine how much your insurance company is willing to pay out in the event a third party files a claim for damages.

If you don't have adequate liability insurance, you should consider purchasing additional rental car liability insurance.

When to buy the collision damage waiver (CDW)

If your personal auto insurance policy includes comprehensive and collision insurance, which protects you against vehicle damage, purchasing the collision damage waiver (CDW) should not be necessary. These coverages will usually extend to a rental car, but you should always confirm with your insurer prior to opting out of the CDW. You should also confirm your coverage limits are high enough to cover the rental car's value and note whether your policy's deductible will still apply for any damage incurred during a rental car accident.

There's one particular circumstance in which comprehensive and collision insurance may not offer the same coverage as the CDW. If a rental car is damaged in an accident and cannot be used while undergoing repairs, some rental car companies may charge something called a "loss-of-use" fee. This extra fee protects the rental car company from lost compensation while the car is not available to rent. The CDW will cover the loss-of-use fee while personal auto collision insurance will not.

You should consider purchasing the CDW if…

  • You don't have comprehensive and collision insurance.
  • Your coverage limits are less than the value of your rental vehicle.
  • You've recently filed a claim to your personal auto insurance policy. Filing a second claim in a short time span could cause your rates to increase substantially over the long term and thereby offset the one-time cost of the CDW.

The CDW is sometimes also referred to as the loss damage waiver (LDW) or excess damage waiver (EDW). While the CDW is functionally similar to comprehensive and collision insurance, it is not actually insurance. Instead, the CDW is a contractual agreement that waives your liability in the event of damage to or theft of your rental car.

When to get personal accident insurance

If your auto insurance policy includes personal injury protection (PIP) or medical payments (MedPay) coverage, purchasing personal accident insurance should not be necessary. These coverages are similar to a rental car company's personal accident insurance.

Many health insurance policies will also cover medical expenses resulting from vehicle-related injuries. However, some health insurance policies don't extend to car accidents, so it's always a good idea to verify your coverage with your provider.

You should consider getting personal accident insurance if…

  • You don't have PIP or MedPay in your auto insurance policy.
  • You don't have health insurance.
  • Your health insurance does not cover car accident injuries.
  • The limits on your insurance policies are exceptionally low.

When to buy personal effects coverage

You probably won't need personal effects coverage if you have homeowners or renters insurance, as these policies often cover claims for theft of personal property from your rental car. However, you should check your policy to make sure its coverage extends to theft of property in rental cars.

If you don't have homeowners or renters insurance, you should consider getting personal effects coverage to protect you against theft of your personal belongings in a rental car.

Does my credit card offer rental car insurance?

Some credit cards, particularly rewards cards, offer some degree of rental car insurance. Coverages offered, however, are generally limited to comprehensive and collision insurance, meaning liability insurance, personal accident insurance and personal effects coverage are not included. If your credit card offers adequate comprehensive and collision insurance, you could decline the collision damage waiver (CDW).

You should still confirm your credit card's policy, as the insurance offered may be considered primary or secondary. In the case of a primary policy, your credit card's insurance will immediately apply to any vehicle or property damage up to the card's coverage limits. If it only offers secondary insurance, the policy will not pay out until you've filed a claim and received the appropriate settlement from your personal auto insurance.

How much does rental car insurance cost?

Rental car insurance coverages are usually priced on a fee-per-day basis.

Coverage typeCost
Supplemental liability insurance (SLI)$7–$15/day
Collision damage waiver (CDW)$9–$19/day
Personal accident insurance$1–$7/day
Personal effects coverage$1–$5/day

What happens if I rent a car with no insurance?

If you are missing any of these coverages and don't purchase rental car insurance, you could be liable for tens of thousands of dollars after an accident. The rental car company could pursue you for damage to the vehicle, while other passengers involved could pursue you for court damages or medical payments. Accordingly, it's always worth buying rental car insurance if you don't already have any of the appropriate coverages through another insurance policy.

Renting a car abroad

Be extra careful if you plan to travel abroad and rent a car, as your policy likely won't cover accidents outside the United States. If you plan to travel to Europe, for example, each country may have different local coverage policies associated with car rentals.

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