Renting a car can make a vacation much easier, but the insurance choices at the rental counter can be confusing. You may already have some protection through your Auto Insurance, credit card, or other policies. In other cases, buying coverage from the rental company may make sense.
The key is knowing what you have before you pick up the car.
Start With Your Own Auto Insurance
If you have a personal Auto Insurance policy, check with your agent or insurance company before your trip. Your policy may extend to a rental car in the United States, but the details can vary.
Generally speaking, if your policy extends to the rental vehicle, your Collision and Comprehensive coverage may apply to damage to the rental car, subject to your policy terms and deductible. Your Liability Insurance may also apply if you cause an accident that injures someone or damages their property.
The National Association of Insurance Commissioners says, “If you have comprehensive and collision coverage on your own car, you will likely not need a rental car Collision Damage Waiver.” However, the NAIC also recommends checking with your insurer because policies differ.
That deductible matters. If your Auto Insurance has a $1,000 Collision deductible, for example, you could be responsible for that amount if you damage the rental car and your personal policy applies.
Should You Buy the Damage Waiver?
The rental counter may offer a Collision Damage Waiver, or CDW, sometimes called a Loss Damage Waiver, or LDW. Despite the name, Avis notes that a CDW “is not insurance at all.” Instead, it is an agreement that can reduce or waive your financial responsibility for damage to the rental vehicle.
Whether you should buy it depends on your situation.
Consider accepting the waiver if:
- You don’t have Auto Insurance.
- Your Auto Insurance does not extend to rental cars.
- Your deductible is high and you want less financial risk.
- Your credit card’s rental coverage does not apply.
- You are renting outside the U.S., and your Auto Insurance does not extend to that country.
- You are renting an unusual or expensive vehicle that may be excluded from your policy.
Without a damage waiver or other applicable protection, your financial responsibility could be substantial. Hertz states that, in many states, a renter’s responsibility can extend to the vehicle’s full value, along with towing, storage, administrative charges, diminished value and loss of use.
Loss Of Use Can Add to The Bill
This is one of the rental-car charges people often overlook.
If your rental car is damaged, the rental company may not be able to rent it while repairs are being made. The company may seek payment for that lost rental income, known as “loss of use.” Avis says renters can be contractually responsible for loss of use when the vehicle is unavailable for rental.
For example, if a damaged rental car normally rents for $75 per day and is out of service for 10 days, the claimed loss of use could potentially be $750, depending on the rental agreement and applicable law. Other charges, such as towing, storage, diminished value, and administrative fees, may also be claimed.
The exact amount depends on your policy and contract. If you don’t know whether your Auto Insurance or credit card covers loss of use, ask before the trip.
Don’t Forget Your Credit Card
Some credit cards offer rental car protection when you use the card to pay for the rental. However, the rules can be strict. Coverage may be secondary, may require you to decline the rental company’s CDW, and may exclude certain vehicles, countries, or rental periods.
Read the card’s benefits guide before relying on it.
Inspect The Car Before Driving Away
Before leaving the rental lot:
- Walk around the entire vehicle.
- Check the bumpers, doors, wheels, windshield, and roof for damage.
- Look inside for stains, tears, or other damage.
- Make sure existing damage is recorded on the rental agreement.
- Take clear photos and video of the vehicle, including close-ups of existing damage.
- Keep those photos until after the rental company confirms the vehicle was returned without a problem.
This simple step can give you evidence of the vehicle’s condition when you received it.
International Rentals Require Extra Care
Don’t assume your U.S. Auto Insurance follows you overseas. The U.S. Department of State says, “Your U.S. auto insurance may not cover you when driving in other countries.” It also notes that even when a policy applies, it may not meet the destination’s minimum insurance requirements.
Before opting for an international rental, check:
- Whether your Auto Insurance applies in that country.
- The country’s Liability Insurance requirements.
- Whether your credit card provides rental protection there.
- Whether you need an International Driving Permit.
- What does the rental company’s CDW or LDW actually covers.
For international rentals, buying the rental company’s protection may be worth considering if your existing coverage leaves a gap.
Take Five Minutes Before Your Trip
Rental car insurance does not have to be complicated. Before you leave, ask your insurance agent about rental-car coverage, deductibles, Liability limits, and loss of use. Then check your credit card’s rental benefits and read the rental company’s waiver terms.
A few minutes of preparation could help prevent a vacation from becoming an expensive lesson in insurance.
