Rental car insurance protects you financially if you're involved in an accident while driving a rental vehicle. Car hire firms will urge you to purchase their insurance coverage and excess waivers when you pay for your rental vehicle. However, you may already be at least partially covered by your personal auto insurance policy or credit card. You should determine if you're already adequately covered by existing policies. If not, consider buying rental car insurance at the rental desk or through a third party insurer in order to protect yourself legally and financially if your rental vehicle is damaged or you cause an accident.
Types of Car Insurance Offered by Rental Companies
Rental companies, such as Avis, Enterprise or Hertz, offer several types of insurance coverage you can purchase at the rental desk when you pick up your vehicle. Generally, this coverage falls into four categories, which coincide with the types of coverage you would normally have through your auto and homeowners insurance policies.
|Collision Damage Waiver (CDW)/Loss Damage Waiver (LDW)||Waives your responsibility for damage to or theft of the rental car||$9 to $19/day|
|Supplemental Liability Coverage (SLC)||Increases your liability coverage up to $1 million||$7 to $15/day|
|Personal Accident Insurance (PAI)||Provides medical and accidental death benefits if you or your passengers are injured or killed in an accident||$1 to $7/day|
|Personal Effects Coverage||Reimburses you for any personal property that is stolen from a rental vehicle||$1 to $5/day|
Do I Already Have Rental Car Insurance Through My Insurer?
If you own a car or drive regularly, you probably already carry an automobile insurance policy. If this is true, you may be able to decline some or all of the coverage offered by car hire firms. However, the types of protection you should decline will vary based on the value of your rental car and your own policy's coverages, deductibles and limits.
|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 comprehensive and collision insurance|
|Personal Accident Insurance||Adequate personal injury protection and health insurance|
|Personal Effects Coverage||Homeowners or renters insurance that extends to rentals|
Should I Buy a Loss Damage Waiver (LDW)?
Despite providing protection similar to that offered by comprehensive and collision coverage, an LDW is not insurance. Rather, it is a contractual agreement that waives the renter's financial liability if their rental car is vandalized, stolen or damaged in an accident. An LDW may also be called a collision damage waiver (CDW) or an excess damage waiver (EDW).
You should purchase an LDW/CDW/EDW if:
- You do not have collision and comprehensive coverage on your own auto insurance policy.
- Your collision and comprehensive insurance limits aren't high enough to cover the actual cash value of your rental car. This may be true if your personal vehicle is less valuable than your rental vehicle.
- You've already filed a claim under your collision or comprehensive coverage in the past year.
- You did not pay for the rental with a credit card that offers an LDW.
You should decline an LDW if you already have collision and comprehensive coverage on a car of similar value to your rental vehicle, or if the credit card you're using to pay for your rental vehicle already offers an LDW. However, if you've already filed a claim in the past year, filing a second claim may cause your insurance rates to increase significantly. In this case, it may be worth paying the small fee for an LDW before driving a new car in an area you're not familiar with.
Should I Buy Supplemental Liability Coverage (SLC)?
Every state requires you to prove a minimum amount of financial responsibility before operating a vehicle. Usually drivers prove this responsibility by obtaining liability insurance. Liability insurance covers the medical and repair costs of other individuals if you cause an accident.
You should purchase SLC if:
- You don't already carry liability insurance. In this case, purchasing an SLC is mandatory.
- Your liability insurance policy's limit is under $50,000 per accident.
If you don't already carry a car insurance policy or another form of financial responsibility, you're legally obligated to purchase liability coverage before you operate your rental vehicle. Additionally, you might want to purchase supplemental coverage if your own policy is subject to low limits. For example, Louisiana drivers are only required to carry $15,000 of bodily injury liability insurance per person and $30,000 per accident. If a driver from Louisiana rents a car in a state with higher minimum liability requirements, their own coverage might not be enough to legally enable them to drive.
Also, if you cause an accident and injure multiple people, the medical costs from that accident could easily exceed the limit of your personal policy. In these cases, SLC would provide vital additional protection, typically up to $1 million in medical fees.
However, you may decline SLC if you carry an auto insurance policy with bodily liability insurance that meets the requirements of the state in which you are driving.
Should I Buy Personal Accident Insurance (PAI)?
Personal accident insurance covers the medical costs of you or your passengers in the event you cause an accident. If you carry an auto insurance policy, you may already have personal injury protection (PIP) or MedPay insurance. In addition, you likely have health insurance. Each of these forms of insurance will provide coverage similar to what you would obtain under your car rental company's PAI. However, some health insurance policies exclude vehicle-related accidents, so you should verify your coverage under your health insurance policy if you don't have PIP or MedPay insurance.
You may need to purchase PAI if:
- You don't have health, PIP or MedPay insurance
- Your health insurance excludes vehicle-related injuries
- You have very low limits on your health insurance and/or your PIP or MedPay coverage
Should I Buy Personal Effects Coverage (PEC)?
Personal effects coverage insures your luggage and other personal belongings that you and your immediate family have brought with you on your trip. However, if you carry homeowners or renters insurance, your belongings are likely already covered, even in your rental vehicle. Because of this, most renters should decline PEC.
You should purchase PEC if:
- You do not have homeowners or renters insurance and plan on keeping valuable belongings, such as a laptop, in your rental vehicle.
It should be noted that some items are typically excluded from PEC. These may include:
- Event Tickets
- Valuable certificates (such as a deed)
- Additional vehicles being towed behind your rental car
Rental Car Insurance Through Your Credit Card
Certain credit cards issued by American Express, Visa and Mastercard offer free LDW coverage when you rent a vehicle. In order to qualify for the coverage, you must be the named cardmember and you must pay for the entire rental using that card. Additionally, you must decline the LDW/CDW offered by the car rental company. Here are limits and stipulations each card declares:
|Credit Cards||All||All||Gold, Platinum, World and World Elite Cards|
|Period||15/31 days||30 days||15 days|
|Deadline to submit claim||90 days||180 days||180 days|
|Contact info||(800) 847-2911||(800) 338-1670 (domestic)
(216) 617-2500 (worldwide)
|Fine print||More info||More info||More info|
It's important to note that the credit cards that do offer rental car benefits only provide collision coverage. This means that you'll still need to purchase liability insurance, as well as any additional desired coverage, separately. Also, some cards exclude coverage if your rental car is a commercial vehicle, such as a U-Haul, or if your rental is taking place on a business trip.
Rental Car Insurance Through an Independent Insurer
If you find your car rental company's insurance prices are too high, you may also purchase rental insurance through a third-party insurer. Companies such as Bonzah, Allianz Global Assistance and Insure My Rental Car offer competitively priced stand alone rental car insurance policies online that might be cheaper for long-term car rentals. Some services also bundle rental car insurance with full travel insurance packages that might be relevant if you're traveling outside of the USA on holiday.
Rental Car Insurance vs. Rental Car Reimbursement Insurance
Rental car insurance covers a driver while they're operating a rental vehicle. Rental car reimbursement insurance helps pay or subsidize the expense of a temporary car while your vehicle is being repaired in the shop after a covered accident. It's an optional coverage on top of your existing car insurance policy. If you use rental car reimbursement to rent a vehicle while yours is in the shop, it does not guarantee that the rental car is insured. Whether you use a rental car company that partners with your insurer to pay for the rental car directly—such as Enterprise Rent-A-Car and GEICO—or you choose your own car rental company, refer to the guide above to decide what coverages to purchase.