Should you purchase rental car insurance? + 6 tips

July 9, 2012 — Leave a comment

Should you purchase rental car insurance?

My head is spinning right now because I’ve spent the last few days researching if I should purchase rental car insurance.  Before I completed all of the research, my standard answer was to never purchase the extra coverage the rental car agency offers.  I mostly did this because I had heard this advice before, and because I’m too cheap to buy extra coverage!  However, after reading many coverage facts and articles, my answer has changed somewhat.

I still won’t buy extra coverage from the rental company unless I’m renting a car internationally or maybe a very short term rental.  Let me explain why.

For most auto insurers, the coverage you pay on your personal vehicle will automatically transfer over to your rental car.  In addition, many credit cards will provide the “gap” coverage for the amounts that aren’t covered by your auto insurance due to deductibles (I carry a $1,000 deductible on collision and comprehensive).

I read through Visa’s rental car coverage, but it’s hard to decipher what exactly they cover.  The combination of both of these offers still may not be enough and you may want to purchase additional coverage.

The reason your combined existing personal auto insurance and the extra credit card coverage may not be enough is because there are additional charges that accrue such as “loss of use” while the rental car is getting repaired and “administrative fees” that are sometimes as much as 6-10% of the cost of the total repair of your rental car.  In addition, many credit card companies only cover certain types of cars (not luxury vehicles, SUVs, etc) or only partial repair costs.  and some of the stories I’ve read don’t make their coverage seem real dependable.

Another reason to get some additional rental insurance is that even if you do use your personal auto insurance to cover the rental car and your credit card covers the deductibles, your accident will go on your record and your insurance company might increase your rates because of it.  If you have coverage through another source, your insurance company won’t know about it and your rates won’t rise.

Where can you purchase additional coverage?

The first option is to purchase it from the rental car company which is typically $10-$30 per day – and is a complete rip-off most of the time.  However, if you’re only renting 1-2 days or if you’re renting a car internationally, you may have no better option.

The best option I found for extra coverage while renting a car is through American Express – it definitely helped this guy .  They offer Premium Car Rental Protection for a flat rate of $24.95 (or $17.95 for California residents).  This covers most everything you need including the extras the rental car agencies like to add on in the event of an accident, but you will need to own an American Express card to use this program.

As mentioned before, you should get extra coverage when renting a car internationally.  The main reason is because most auto insurance providers don’t cover cars outside of the United States.  In addition, some countries are pretty crazy about wrecks and will make you pay up right then.   The first option is American Express which covers all countries except around 5, or you’ll have to buy the insurance from the rental car agency in that country.

What type of coverage is offered by the rental car company?

Rental car companies offer five main types of coverage.  As mentioned earlier, most of these are covered by your existing auto insurance.

Collision Damage Waiver (CDW) – mostly covered by auto insurance / credit card

Personal Accident Insurance (PAI) – mostly covered by health insurance

Loss Damage Waiver (LDW) – mostly covered by auto insurance / credit card

Supplemental Liability Insurance (SLI) – extra insurance, usually not worth it

Personal Effects Coverage – covers personal items stolen from the car

Out of all of these, the one you may consider most is the “Personal Effects Coverage”, but I also read it’s  pretty painful to go through the process of trying to submit a claim.

I’ve rented quite a few cars in my life without paying for extra coverage, and so far I haven’t had to pay for damage.  However, I’ve had damage to at least three rental cars.  Two of the accidents occurred while I was traveling for business so they were covered by Corporate American Express and my company.  They were minor instances.

The third occurred while I was renting a car for my brother’s wedding.  Long story short, I was driving the car “like a rental” and when I had to turn around while driving through the Ozark Mountains, I backed into a rock and punched a hole in the bumper of the car!!  I won’t mention the name of the rental car company because they might still come after me… but when we got home, my dad was able to fix the hole in the bumper well enough so they didn’t see it!  This involved using some bondo, matching the maroon color with spray paint, and then driving around in dust to try and mask it.  I was stressed the next few months hoping I wouldn’t get charged and luckily I didn’t.

To avoid something like that again, I now want to make sure I’m covered.  This is a new revelation to me since I researched this article – I even rented a car this past weekend and didn’t get the extra coverage!  I wasn’t really aware of what I was liable for, and I thought the rental car agents always used scare tactics to make it sound worse than it is.  However, if you do get in a wreck or even receive a ding on the door, you’ll wish you had some extra protection.

Here are 6 steps to take when renting a car to ensure you are covered:

1.  Contact your auto insurance company to see what coverage is provided for the rental car

2.  Contact your credit card company and ask what their automatic plans offer

3.  Reserve your rental car

4.  Depending on what your car insurance company or credit card company said, you may need to call them again to ensure they cover the type of car you rent (some don’t cover SUVs, luxury cars, etc)

5.  Check in to purchasing additional coverage from a service such as American Express or through the rental car agencies if you have a short rental

6.  Upon receiving the car, inspect it to ensure there isn’t any damage before you rent it

State Farm also has a helpful guide to help you walkthrough when you might need to purchase insurance:

Situation What coverage to look for When to consider add’l coverage
You have a personal auto policy Read your policies carefully or call your insurance agent to ask for details of coverage. Many auto policies cover rentals with the same type and amount of coverage on your personal vehicle. Also ask about coverage for any administrative fees you may be responsible for, such as loss of use (rental income not earned on a car while it is in the repair shop). If your policy does not cover rentals, has a high deductible, or does not include collision coverage or sufficient comprehensive coverage, you may wish to purchase additional coverage from the rental company. Also, insurance is invaluable in foreign countries where you may be responsible for paying for the damage in full before you leave the country.
Your credit card offers rental insurance Carefully read the documentation that came with your specific credit card and understand the extent of the coverage it provides. Depending on the level of coverage your credit card provides, you might consider adding coverage from the renting agency.
You are traveling on business Your employer may provide corporate insurance for rented vehicles. Be sure to know the applicable corporate policies and procedures before you rent a car for business.
You do not own a car If you do not own a car and therefore do not carry auto insurance, you will need to purchase insurance from the rental agency. Take your time at the rental counter to consider the coverage packages being offered. You may not need the most expensive plan being offered.
You are renting a car in a foregin country Check your auto insurance policy for possible exclusions or limitations on renting a car abroad. Also check for coverage that may be offered by your credit card company or auto club. If you are not sufficiently covered, you may wish to purchase third-party travel insurance to cover your foreign rental, or the Loss Damage Waiver from the agency. You will still be liable for any costs resulting from vehicle damage that are not covered by the waiver.


One final note, if you rent a moving truck such as Uhaul, most insurances don’t cover that at all.  I have a friend who rented a Uhaul, damaged the upper portion above the cab (Mom’s Attic), and had to pay out of pocket to cover it.  The only insurance I’ve found for that is through the Uhaul company.  I’ve rented a few without the coverage, but I’m sure my friend will get the coverage next time!

In the end, purchasing rental car insurance sucks, but after thoroughly researching it, I now recommend some sort of extra coverage.  In the future, I’ll write about how to save money on your rental car – one great way is to use services such as Hotwire and Priceline.  Do you purchase insurance for your rental car?

p.s.  – I’m not liable if you take any of this advice and it doesn’t work out for you!

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