What Is Rental Car Insurance and Who Needs It?
Updated: September 13, 2024
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Whether you own a car or rent, insurance is an important consideration for any driver. Rental companies offer coverage, but it can be pricey and unnecessary if your personal auto policy extends to rentals. If your personal policy doesn't cover rentals, you'll need to purchase rental car insurance to drive legally.
Be sure to note the difference between rental car insurance and rental reimbursement; the latter is an insurance add-on covering rental costs if your car is undergoing repairs.
Rental car insurance is optional coverage that protects you from financial loss if your rental car is damaged or stolen.
You can buy rental car insurance from the rental company, your personal car insurer, your credit card company or a third-party provider.
Consider buying rental car insurance if you don't have comprehensive and collision coverage on your personal auto policy, you're renting an expensive car or you are traveling to a foreign country.
Rental car insurance is coverage that protects you from financial loss if your rental car is damaged or stolen. This coverage is separate from rental reimbursement coverage, which is an add-on to your personal full coverage auto insurance that covers the cost of a rental car if yours is undergoing repairs after an accident.
Rental car insurance typically includes a combination of the following waivers and coverages:
Collision Damage Waiver (CDW) / Loss Damage Waiver (LDW)
This waiver protects you from having to pay for repairs or replacement of the rental car if it's damaged or stolen. It's one of the most important factors to consider, as the cost of repairs can be significant. Note that CDW/LDW typically has a deductible, which is the amount you'll have to pay out-of-pocket before the coverage kicks in.
Liability Insurance
This coverage helps pay for bodily injury and property damage you cause to others in an accident. It's important to have liability car insurance to protect yourself from potential lawsuits and financial liability.
Personal Accident Insurance (PAI)
This coverage can help pay for medical expenses for you and your passengers if you're injured in an accident. It may also provide benefits for accidental death or dismemberment.
Personal Effects Coverage (PEC)
This coverage can help pay for the loss or theft of personal belongings from your rental car. It typically has a per-person and per-occurrence limit, so check the details of your policy to understand what's covered. If you have homeowners or renters insurance, your belongings might already be covered.
Knowing where to buy rental car insurance is helpful before you rent a car. You have several options, each with its own advantages and drawbacks. Here's a breakdown of where you can get coverage:
Rental Car Company
The most convenient option is to purchase insurance directly from the rental car company when you pick up your vehicle. However, this is usually the most expensive option. You also may not need it if you already have coverage through your personal auto policy or credit card.
Personal Insurer
Your existing car insurance policy may extend coverage to rental cars, but this isn't always the case. Review your policy documents or contact your insurer to confirm your coverage. If your policy covers rentals, ensure it matches your needs regarding coverage limits and deductibles.
Credit Card
Some credit cards offer rental car insurance as a benefit, but the coverage can be limited. Before relying on your credit card, check if it provides primary or secondary coverage, and review the terms and conditions for exclusions and limitations.
Third-Party Providers
Independent insurance companies offer standalone rental car insurance policies that can be more affordable than the options from rental car companies. These policies often provide comprehensive coverage and may have lower deductibles.
If your full coverage car insurance policy includes rental car coverage, you might be covered when driving a rental car. Your existing liability, collision and comprehensive coverage will extend to the rental car, and it will automatically adjust to meet the minimum liability car insurance requirements of the state you're driving in.
You can purchase rental car insurance from various providers. Most car insurance companies consider this a separate product, so you can check with your insurer to find out if getting it through them is an option. If it isn’t, standalone companies, such as Avis, Hertz and Enterprise, specialize in this. The table below highlights coverage options and costs from each company.
Company | Total Insurance Cost | Supplemental Liability Cost | Collision Damage Waiver Cost | Personal Accident Insurance Cost |
|---|---|---|---|---|
Enterprise | $50 | $13 | $31 | $6 |
Avis | $54 | $16 | $30 | $9 |
Hertz | $56 | $17 | $32 | $7 |
Understanding rental car insurance will help protect you and your rental vehicle. Various coverage types offer protection against accidents, theft, personal injuries and loss of personal items. They also cover rental costs and deductibles. Knowing what each type covers ensures comprehensive protection during your rental period, providing peace of mind while you drive.
Check out this comparison of insurance options to protect your rental car:
Coverage Type | Rental Car Insurance | Personal Car Insurance | Credit Card Coverage |
|---|---|---|---|
✓ | Often, check your policy and limits | Varies by card | |
✓ | Often, with full coverage car insurance | Varies by card | |
✓ | Often, with full coverage car insurance | Varies by card | |
Personal Accident Insurance (PAI) | ✓ | Sometimes, if you have medical payments or PIP coverage | Varies by card |
Personal Effects Coverage (PEC) | ✓ | No | Varies by card |
Loss of Use Coverage | ✓ | Rarely | Varies by card |
N/A | Pays for rental car if your vehicle is being repaired after a covered accident | N/A | |
Typically none or low | Varies depending on your policy | Usually none, but varies by card |
Your personal car insurance or credit card might not cover rentals in other countries. To avoid surprises, talk to your insurance agent about international rental car coverage. If it's not included, you can buy a separate policy from a company specializing in international car insurance.
Deciding whether to purchase rental car insurance depends on several factors. In some situations, it's highly recommended to protect yourself from unexpected costs.
Consider buying rental car insurance if:
You don't have comprehensive and collision coverage on your personal auto policy
These coverages protect your own car from damage and theft, and they typically extend to rental cars. If you don't have them, rental car insurance is essential to avoid paying for repairs out of pocket.
You're renting an expensive or luxury car
Rental companies often charge more for insurance on high-value vehicles. Additional insurance can protect you from significant financial loss if your personal policy doesn't fully cover the rental car's value.
You're traveling to a foreign country
Your personal auto insurance and credit card coverage may not extend to international rentals. In this case, it is wise to purchase rental car insurance from the rental company or a third-party provider.
You have a high deductible on your personal auto policy
If your deductible is high, you might end up paying a large amount out of pocket in case of an accident. Rental car insurance can help cover these costs.
You want peace of mind and additional protection
Even if you have some coverage through your personal policy or credit card, you might want the extra security of rental car insurance to avoid any potential hassles or gaps in coverage.
Rental car insurance isn't legally required in New Hampshire or Virginia, so you can skip it if renting there. But in all other U.S. states and Canada, you'll need to ensure you have enough coverage before hitting the road in your rental car.
Choosing the right rental car insurance involves weighing your needs, budget and the specifics of your rental vehicle. Here are key factors to consider when making your decision:
Cost
Rental car insurance costs vary depending on the provider, type of coverage and rental duration. Compare quotes from different sources to find the most affordable option that meets your needs.
Coverage Limits
Ensure the policy's coverage limits are sufficient to cover the rental car's value and potential liability costs in case of an accident. Don't skimp on coverage just to save a few dollars.
Deductibles
A deductible is the amount you pay out of pocket before insurance covers the rest. A higher deductible generally means lower premiums, but make sure you can comfortably afford the deductible if you need to file a claim.
Exclusions
Carefully review the policy's exclusions to understand what's not covered. Common exclusions may include damage due to off-road driving, driving under the influence or using the car for commercial purposes.
Additional Factors
Consider the insurance provider's reputation, claims process, customer service ratings and any additional benefits they offer, such as 24/7 roadside assistance.
If you're a licensed driver who rents cars frequently but doesn't own one, consider non-owner car insurance. It's a liability-only car insurance policy, meaning it won't cover damage to the rental car itself, but it can offer better protection than the rental company's insurance. You can even boost your coverage by increasing your policy limits.
If you’re unfamiliar with car rental insurance, it may seem confusing. Our guide addresses the most commonly asked questions about this insurance to help you decide if it’s something you need.
Rental car insurance protects you from financial responsibility if your rental car is damaged or stolen. It typically includes collision damage waiver (CDW), liability coverage, personal accident insurance (PAI) and personal effects coverage (PEC).
You may not need rental car insurance if your personal auto insurance policy extends coverage to rental cars or if your credit card offers primary rental car insurance. Check your existing policies for coverage details.
A CDW is a type of rental car insurance that covers damage to the rental car in case of a collision, theft or vandalism. It's not technically insurance but a waiver that releases you from financial liability for the damage. There may be a deductible, which is the amount you'll pay out of pocket before the CDW covers the rest.
If your personal auto insurance doesn’t cover rentals, it's usually a good idea to get rental car insurance. It can save you from paying for damages out of pocket after unforeseen events. In addition to collisions, it also covers things like theft, vandalism and fire.
About Mark Fitzpatrick
Mark Fitzpatrick is a Licensed Property and Casualty Insurance Producer and MoneyGeek's Head of Insurance. He has analyzed the insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. He has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.
Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.
