You get off the plane and go to the rental car desk. The agent asks, “Would you like to purchase insurance for your rental car?” This is not the sort of thing you want to research on your vacation, so it is a good idea to know what is covered before you go on that trip.
Your Car Insurance Usually Covers Rental Cars
The most likely answer is that you do not need to purchase additional rental car insurance. If you own a vehicle that is insured and have the proper coverages, your policy most likely covers rental cars. However, this should not be assumed. Different car insurance companies provide different types of coverage in their policies. You should contact your insurance agent and check your car insurance policy to make sure it covers rental cars. Also, make sure anyone who will be driving the rental car is listed on the rental contract. (There may be an extra charge for each person who drives the rental car).
There is also the possibility that paying with your credit card may provide some insurance coverage for the rental car. However, credit cards mostly cover theft and damage to the car − what is known as a collision damage waiver (CDW) and a loss damage waiver (LDW). Credit cards usually do not cover liability (damage to another vehicle). And while you may be covered for damages to the vehicle, you may not be covered for personal injury.
Most credit card coverage is also secondary, meaning you must first file an insurance claim with your car insurance. Your credit card insurance kicks in after this. Consumer credit cards also offer different coverage levels than a business credit card. The bottom line that you should contact your credit card representative and check your credit card’s benefit statements to learn more about your specific card’s benefits.
Credit card coverage can be helpful if you are renting a car in another country, as American car insurance companies often do not cover international rentals outside of Canada (some countries are also not covered by credit cards). But be aware that there are often limits to the length of credit card coverage on rentals, usually between 15 and 30 days. Also know that most credit card companies do not cover luxury vehicles.
Times to Purchase Rental Insurance
All of that being said, rental car insurance exists for a good reason. There are times where you should purchase rental insurance. The most obvious cases are if you do not have your own car insurance policy or if your policy does not cover rentals. However, even if you have car insurance that covers rentals, there are situations where it may be worth considering rental insurance, such as:
- Your car insurance does not have comprehensive or collision coverage. People often forego comprehensive and/or collision coverage for older and less valuable vehicles. But you probably want both comprehensive and collision coverage for a rental. You do not want to risk paying out of pocket for repairs to a rental car from a collision. And you will want comprehensive coverage in case of damage not caused by a collision (fire, pot hole, etc.).
- Your car insurance has a high deductible. Another way people attempt to save money on car insurance is by selecting a high deductible. But this means you risk paying a high deductible if you are involved in a crash with a rental car. Purchasing rental insurance can lower such a deductible.
Whether or not you should purchase rental insurance is an important question to look into. You do not want to waste money by purchasing unnecessary rental insurance. However, you also do not want to drive a rental car without the proper insurance coverage.
As each situation is different, it is important that you take the necessary steps to determine if your car insurance and/or credit card provides adequate protection and coverage for the rental car.
If you would like more information about rental car insurance or if you have any other questions about car insurance, please contact our office at (734) 761-7282 to speak with an attorney.