When renting a car for personal use, the auto insurance policy you hold for your vehicle will probably already provide some of the basic protection being sold by the rental company. We’ll show you the types of protection rental companies offer, what your own policy already covers, and what gaps you might need to fill in. For more on how to work with your insurer to pay for damage to a rented car after an accident, read about rental reimbursement here.
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What Does My Personal Policy Already Cover?
If you have liability, collision, and comprehensive insurance on your own vehicle, you will already be protected, at least up to the policy's limits, for most of the coverage that’s typically offered by rental companies. In addition, most renters or homeowners insurance policies will cover personal items that could be stolen from your rental. You should review your policies before deciding to purchase coverage at the rental counter.
|Policies rental companies offer||You may choose to decline if you have...|
|Liability Insurance Supplement||Adequate personal liability insurance|
|Collision Damage Waiver (CDW)/Loss Damage Waiver (LDW)||Adequate personal collision insurance|
|Personal Accident Insurance||Adequate personal injury protection and health insurance|
|Personal Effects Coverage||Homeowners or renters insurance that extends to rentals|
Liability Insurance Supplement: If you have a personal auto insurance policy, you will already have some protection that overlaps with that offered by the car-rental company. That’s because both the liability coverage on your existing policy and the rental car company’s liability insurance cover you for the cost of damage you do to other vehicles and their passengers in an accident for which you were at fault. We recommend carrying at least $25,000 of bodily liability insurance per person, $50,000 of bodily liability per accident, and $25,000 of property liability (25/50/25). Ideally, however, you should carry enough insurance to cover the value of all of your assets, in case you are sued for an amount in excess of these amounts.
Collision Damage Waiver/Loss Damage Waiver: If you have collision and comprehensive coverage on your personal auto insurance policy, you can usually choose to decline this waiver, which typically costs about $9 to $19 per day in the U.S. But, your collision and comprehensive insurance limits should ideally cover up to the Actual Cash Value (ACV) of the rental vehicle for adequate protection. If your personal vehicle is much less valuable than your rental vehicle, your collision and comprehensive insurance is likely not enough. The CDW/LDW relieves you of financial responsibility for damage done to the rental vehicle and from the fee a rental company might otherwise be able to charge you for the loss of use of their vehicle while the vehicle is being repaired, provided enough of their fleet is already in use. These costs are often covered by your collision and comprehensive policies, depending on the type of damage, but you should check your policy to make sure it doesn't exclude loss-of-use coverage for a rental vehicle.
Personal Accident Insurance: If you already have medical payments, no-fault, or personal injury protection through your auto insurance policy, as well as adequate personal health insurance, you may safely decline the personal accident insurance offered by rental companies. This insurance covers the medical fees incurred due to a car accident.
Depending on where you live, you may be required to carry such insurance on your personal policy. Currently, 15 states require PIP coverage to be included with auto insurance policies, albeit for differing amounts. Where PIP coverage isn’t required, you may buy it, of course. Alternatively, you can turn to your health insurance to cover your medical bills from any accident. Since these can easily amount to tens or hundreds of thousands of dollars, be sure your health insurance policy is adequate to protect you. Insured drivers from these 15 states definitely have at least some overlapping coverage from their PIP policies.
|Coverage by State||Minimum PIP Limits|
|Kansas*||9,000 (and others)*|
Drivers from other states should have comparable coverage, as long as they have a PIP policy. As always, check your policies for any specific exclusions and limits pertaining to rental vehicles. Policyholders with a low maximum limit on their medical or PIP insurance may want to purchase additional coverage from the rental company.
For each of these forms of insurance, certain exclusions may apply. For example, many policies exclude luxury vehicles, commercial vehicles (e.g. U-Hauls), cargo or 15-passenger vans, or rentals made for business trips. Check your policies to ensure you're covered before declining coverage at the rental counter.
Personal Effects Coverage: If you have renters or homeowners insurance, you should probably decline this coverage. Personal Effects Coverage reimburses you for personal items that may be stolen from your rental vehicle, but renters or homeowners insurance policies typically already include this coverage. For example, State Farm includes off-premises loss in their renters insurance policy worldwide for 16 different types of peril (fire, theft, explosions, etc.).
Types of Rental Insurance Covered Through Credit Cards
In addition to personal auto insurance and renters or homeowners insurance, most major credit cards offer supplemental coverage provided you use that card to pay the full balance of the rental.
However, this insurance is sometimes secondary, meaning it applies only after your personal insurance plans are applied. Further, it often comes with other caveats, such as a requirement that you decline the CDW offered by the rental policy. For example, eligible MasterCards only provide coverage if the renter declines the rental company's CDW, the rental does not exceed 15 days, and all other insurance policies available to the driver have been exhausted. In addition, MasterCard excludes from coverage all trucks, full-size vans, and antique vehicles. Carefully examine your card's benefits and exclusions before relying on it for car rental insurance.
When Should I Buy Rental Insurance, Even If I'm Already Covered
There are a few cases when you might want to purchase insurance from a rental company, even if you're already covered by your personal policies:
- You only have liability insurance
- You only have the state-mandated minimum liability insurance
- Your personal auto insurance policies have high deductibles
- You're an at-risk driver or you want to protect your personal auto policy premiums
- You have very low limits to your collision or comprehensive plans
If you only have liability insurance, we recommend purchasing the Collision Damage Waiver (CDW). Your liability insurance will help protect you if you damage another vehicle, but it won't cover any of the costs of repairing your rental vehicle. Without the CDW or personal collision and comprehensive insurance, you'd be responsible for any repair costs and loss-of-use fees you incur on your rental, even if you weren't at fault for the accident.
If you only have the state-mandated minimum liability insurance, you might want to opt for additional liability insurance from the rental company to protect yourself from the costs of damaging another vehicle and its passengers. For example, Arizona's state-mandated minimum bodily injury liability is just $15,000 per person. If that's the amount you carry on your policy, and you cause an accident that results in $200,000 in medical expenses for the other driver, you'd be responsible for the difference of $185,000. Additional liability protection would allow you to eliminate the risk of such a gap.
If your personal auto insurance policies have high deductibles and you're worried about having to pay for minor damage, such as dings or scratches on your rental, the CDW will relieve you from responsibility for these repairs. For example, repairing a scratch on a car can cost anywhere from $150 to $900. On your own vehicle, you can choose to turn a blind eye to minor defects. The rental company, by contrast, may not do so, and, with a high deductible on your policy, you'd wind up paying out-of-pocket for any needed repairs. Just make sure any CDW you buy doesn't come with its own, comparable deductible.
If you're an at-risk driver or you want to protect your personal auto policy premiums, you might want to purchase their CDW, liability, or personal accident insurance. This is especially true for drivers who have already had an at-fault claim in the last three years and don't want to see another severe increase in their auto insurance premiums. Drivers who make their first at-fault claim will likely see an average premium increase of 10–25% for three years. If that driver makes a second claim within that time period, another increase of at least 45% is probable. Those hikes in premium could quickly eclipse any amount you spend on supplemental insurance from a rental company. However, no claim made on an insurance policy purchased from a rental company will affect your personal insurance premiums, since the policy is underwritten by a separate insurer.
If your personal vehicle is much less valuable than your rental, your personal collision and comprehensive policies might have low limits on the maximum coverage they provide. For example, let's say you drive a standard, 2009 Nissan Altima in good condition with 100,000 miles on its odometer. The Actual Cash Value (ACV) of your car is about $2,700. Any collision and comprehensive policies you have on the car would likely cover you only up to that amount, less the deductible.
Now let's say you drove off the rental-company lot in a 2016 BMW 2 Series with 10,000 miles on its odometer. The ACV of that vehicle is about $22,000. Were you to get into an accident that totaled the BMW, your personal policy might only cover up to $2,700 of the damage, leaving you on the hook for around $20,000 after the deductible is applied. If your rental car is much more valuable than your personal vehicle, it’s wise to purchase the CDW to eliminate the potential for such financial responsibility.