Rental car insurance: Do you need it?

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Whether you buy coverage from a rental agency or use your own car insurance, you should always have enough insurance to pay for costly repairs in case you get into an accident in a rental car. While it isn’t required by law, forgoing rental insurance can cost you thousands of dollars if the car is damaged while you’re renting it.

If you already have car insurance, call your insurance agent and find out if you will have enough coverage under your existing policy. You could also call your credit card company: Many offer coverage when you charge the rental on the card. Both of these options are cheaper than purchasing insurance at the rental counter.

However, if you don’t have rental coverage through either of those options, you’ll need to purchase an individual renters car insurance policy.

Where to get rental insurance

Your auto insurance

If you have car insurance, the type of coverage you bought, along with its deductibles, usually also applies to rental cars.

Assuming you purchased collision coverage, it will cover damage you cause to any car that you’re driving. However, many auto insurance policies say that your collision insurance is “excess” to any other coverage, meaning that if you buy rental car insurance, that kicks in first. Additionally, your collision insurance requires you to pay a deductible before the insurance company picks up the tab.

Your comprehensive coverage will likely cover fire, theft, vandalism, or animal collisions. Again, your own comprehensive coverage is excess coverage and is subject to your deductible.

If you cause an accident, your liability insurance will pay for the damages you cause to someone else, including medical expenses. Your liability insurance will cover you up to the limits of your policy, and if you were driving a rental at the time of the accident, your personal auto liability insurance, like your comprehensive and collision, will likely be excess coverage.

Your credit card

Many credit card companies offer rental car insurance benefits for free if you charge the rental on your credit card. If it’s not free, your credit card company may offer a cheaper deal than if you purchased it at the rental counter.

However, the Insurance Information Institute (III) recommends that if you choose insurance offered by a credit card company, ask to have the details of your coverage sent to you in writing. Credit card insurance coverage varies greatly from company to company, so you’ll want to know the details of your coverage beforehand. For example, some credit card policies cover only damage to your rental car but not to other cars. Meanwhile, others do not offer personal liability coverage for bodily injury or death claims.

Rental car company’s insurance

Rental car companies sell various types of insurance and waivers that broaden your liability protection and will cover the damages of a wrecked rental.

Loss damage waivers (LDW) and collision damage waivers (CDW) from the rental company let you off the hook if the rental is stolen or vandalized, or if you crash it. According to III, your coverage may become void if the accident was caused because you were speeding, driving under the influence or some other reckless error on your part.

If you already have comprehensive and collision insurance for your own car, don’t duplicate the coverage you already have. But if you’ve dropped your comprehensive and collision coverage or don’t have auto insurance, it’s worth the money to ensure you’re not paying thousands of dollars in the long run.

But, if you are worried that your own auto policy has low liability limits, you can purchase extra coverage for between $7 and $14 per day, according to III. It will often cover you for up to $1 million if you cause an accident, damage property or injure others. If you purchase this insurance from the rental car company, it becomes your primary liability insurance. Your own personal auto liability insurance is, again, relegated to excess-coverage status. However, III suggests that buying an umbrella policy may be much more cost-effective.

Most rental car companies also offer “personal effects” coverage for your personal property that might get stolen out of the rental vehicle.

Should you buy rental car insurance?

If you don’t have collision and comprehensive insurance through your car insurance or credit card and you’re renting a car, it’s a good idea to purchase coverage from your rental company.

Most states require the rental companies to automatically provide at least the minimum required liability coverage at no charge to you. If you feel that you can get by with just the bare-bones policy, you won’t spend a dime on liability insurance.

When purchasing coverage at the rental counter, keep in mind that their offerings of accidental death and personal property insurance give you needless double coverage — if you already have health, homeowners, renters, or life insurance. Typically, your health insurance — or auto insurance if you have MedPay — will kick in for your medical costs, regardless of what car you’re driving. Your homeowners or renters policy normally covers personal property if it’s stolen or damaged while in your car. And life insurance will stay pay out for a death in a rental car.