You Do Not Have Any Type Of Insurance
Driving without any type of car insurance is illegal in most states, and it could land you in serious legal and financial trouble. To be compliant with the law and to avoid putting yourself at financial risk, its important to have the proper coverage in place when renting a vehicle.
According to financial expert Laura Adams, If you do not have auto insurance, you should purchase liability and a damage waiver for a rental car, at a minimum. If you have a non-owner auto insurance policy, it only covers liability, so you should purchase damage protection.
Some uninsured drivers rely solely on the rental car coverage that their credit card company provides. Although rental car coverage through your credit card can be helpful if you already have a primary insurance policy, it might not offer adequate protection as the only means of insuring your rental vehicle. Before declining additional damage protection, you may want to call your card issuer for more information on their rental car coverage policy.
Where To Buy The Best Rental Car Insurance
If you know you need to buy insurance for a rental car, there are three ways to do it:
What Else Can I Do
If you dont have auto insurance but you drive a lot when you travel, consider buying rental car insurance. Or you can buy coverage for vehicles you dont own . That way you wont have to buy a new policy each time you rent a car.
The rules are different for business travel. Check with your employer about rental car coverage.
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Top Tips For Insuring Your Rental Car
Before you rent any vehicle, its best to contact the company so that youre clear on what is and isnt covered during your trip requirements can vary locally and nationally, so the terms could be different each time you rent a car.
Its also worth checking if the agency accepts debit cards when you reserve the car , and whether they require the card to have embossed numberssome companies still use the card to take an imprint, but this is becoming less common.
Do You Need A Collision Damage Waiver
Its wise to purchase this type of rental car insurance. While your regular car insurance policy may include collision coverage for rental cars, it most likely includes a deductible and may not pay for all the rental car company’s charges, such as loss of use .ii Your credit card may include free collision damage coverage, but credit card rental car insurance is typically secondary coverage, meaning any claims will go first to your auto insurance company.
The most affordable way to ensure adequate protection in case of collision or theft is with third-party rental car insurance. The Rental Car Damage Protector from Allianz Global Assistance provides affordable collision loss/damage insurance coverage up to $75,000.
Unlike the waivers rental car agencies sell, the Rental Car Damage Protector is actual insurance that can protect your rental car almost anywhere in the world.
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Homeowners Or Renters Insurance
Homeowners and renters policies usually cover personal possessions when they are outside of the home, including items stolen from a rental car. Though there are often limitations with high-end electronic equipment and cameras, this insurance is usually better than the daily rate coverage the rental company offers. Coverage may be denied if the rental or trip is for business purposes.
Why You Might Not Have To Buy Extra Rental Car Insurance:
- In most cases, your personal auto insurance will cover you as if you were driving your own car.
- Major credit cards generally include some level of collision insurance when you reserve and pay for the entire rental with that card.
- If you are traveling for business, you are likely covered by a company insurance policy. Check with your employer to be sure you know what coverage they provide.
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Youll Pay Up Front For All Damage
You can cover your major damage responsibility by relying on your own insurance, a credit card with insurance, or a third-party policy. But in all of those cases you have to pay a damage claim up front, then recover as much as you can by filing a claim afterward. That means signing a credit card bill for hundreds or even thousands of dollars when you return the damaged car, and not knowing if youll get that money back.
Thats why many rental companies wont accept rentals via debit card, or a credit card with a small limit. If you can pay the initial rental fee with a debit card, youll still need to provide a credit card to cover a possible damage claim, which would be filed before you can leave the return counter.
Should I Get Rental Car Insurance
So, should you get rental car insurance? It depends if you want peace of mind that youll be covered in a worst-case scenario. If you want coverage, opt for the rental agencys collision damage or loss damage waiver if you dont already have full coverage insurance.
One study in the Journal of Advanced Transportation found that inattention, poor driving, poor handling and aggressive driving are all associated more with rental cars than non-rental cars. You might be a great driver on your regular commute, but it can be stressful driving in a new situation.
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Do You Need Supplemental Liability Insurance
Someone trying to sell you rental car insurance may say your liability coverage is too low and encourage you to buy supplemental insurance. If you’re worried about liability, there’s a better way to protect yourself. The Insurance Institute of America suggests buying “umbrella liability insurance,” a low-cost policy added to your auto and homeowners insurance that can provide extra protection while driving your car or a rental.iv
U.S. auto insurance policies often dont provide any coverage abroad, so you may want to or youll be required to purchase liability insurance when youre traveling overseas.
Rental Car Insurance Faq
No, you do not need insurance to rent a car because rental companies have their own insurance. Rental car companies usually provide minimum liability coverage only, so if you don’t have personal insurance, you’ll probably want to purchase extra rental car insurance through the rental company. If your personal car is insured and you pay for your rental with a credit card, you can probably skip the optional coverage offered at the rental counter.
Coverage Offered by Rental Car Companies
- Collision Damage Waiver:
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Supplemental Liability Insurance Or Protection
Supplemental liability insurance increases the amount of liability coverage that you get when you rent a car. Adding SLI/SLP when you rent a car can give you hundreds of thousands of dollars more of liability insurance per accident.
SLI/SLPs have a combined single limit. That means that youre insured for one amount, not for every person involved in a crash like with standard car insurance. For example, if you get $300,000 of liability insurance with your SLI/SLP add-on, youre covered for up to $300,000 for injuries and property damage after a single accident.
Cost of SLI/SLP: $8 to $17 per day
Who should get it: Drivers who want more protection than the bare-bones liability coverage that comes with their rental car.
Do I Need Car Rental Insurance
The short answer is: yes, you definitely need it! The tricky part is knowing what type of insurance you need, where to get it, and what different policies cover.
There are many different types of rental car insurance coverage, deciding which one to take depends on the level of protection you would like to obtain some cover only the vehicle you rented, others also cover injuries or damage caused to others or to yourself and your passengers.
The car rental company you select will clearly mention in their terms and conditions which type of insurance is mandatory according to their own policy and local legislation. Keep in mind that car rental companies tend to recommend additional coverage, so determining whats necessary and whats extra in advance can help you choose whats best for you.
If youre looking for budget-friendly options, make sure to verify the coverage of the insurance policies you already have to potentially save money. For example, go through your own car insurance, your personal insurance or the car rental insurance benefits included in your credit card, and check if any of those are compatible with the requirements of the car rental company you selected.
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What Car Rental Insurance Should I Get
Now that we know what car rental insurance can cover, its important to know what type of insurance applies to each type of coverage. When it comes to car rental insurance options, there are a bunch of confusing acronyms, scenarios, and regulations that change from city to city.
There are basically six types of car rental insurance coverage depending on their function. Youll find insurance that protects the rental car, other people and their property, personal accidents, and roadside assistance. Heres a simple break-down of your options:
Collision Damage Waiver
A Collision Damage Waiver, often shortened to CDW, is an optional insurance policy that provides coverage in case your vehicle is damaged during the period of your rental. In many countries, a CDW is packaged together with an LDW , which also provides theft protection in case your rental car is stolen during the period of your rental. However, in the USA and Canada, these policies are often purchased separately.
Supplemental Liability Protection
Personal Accident Insurance
Personal Insurance covers the driver or the policy holder. It can cover expenses in the event of an accident, like ambulance transportation and similar costs that stem from medical assistance. Likewise, the drivers belongings can be covered using a Personal Effects insurance in the case of theft or loss.
Loss Damage Waiver
Personal Effects Coverage
This is for theft of personal items in a rental car up to $1,500.
Rental Car Liability Insurance
Liability insurance covers damage to other vehicles, property and people as a result of accidents you cause when driving your rental car. Note that this does not cover you, your passengers or the rental vehicle itself.
The state minimum levels of liability insurance are included as part of the basic rental fee in almost every state. In these cases, any additional insurance you purchase will at most give you higher coverage limits. There are some exceptions, most notably in California, where rental companies are not required by law to include liability insurance.
- Average cost: $1016 per day
- Comparable to: Bodily injury liability and property damage liability insurance
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Rental Car Insurance: To Buy Or Not To Buy
The bottom line when it comes to rental car insurance is to make sure you dont pay for something you dont need. But its also not worth taking unnecessary risks to save a buck.
If you rent cars often, you might want to update your personal policy to get more coverage while you rent. And even if you dont rent often, its still good to review your personal policy when you travelor at least once a year.
As long as you have a solid auto insurance policy, next time youre at the rental agency counter you can simply smile and say, No thank you.
If you need to update your auto insurance policy, or want to make sure you have enough coverage, we recommend working with an independent insurance agent whos part of our Endorsed Local Providers program. Theyre RamseyTrusted and will listen to your specific situation to get you coverage that suits your needs and your budget.
Connect with an ELP near you and start saving today!
About the author
Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.
Should You Get Additional Coverage
You still want to know, Should I insure my rental car? It all really depends on the amount of coverage you currently have or dont have.
If you dont have comprehensive and collision coverage, you should consider getting the collision damage waiver. Also, if you dont have personal injury protection or health insurance, youll need personal accident insurance. You can also consider personal effects coverage if you dont have protection.
Some people are comfortable with lesser amounts of coverage, while others prefer to have a blanket of protection. At the end of the day, its up to you to decide how covered youd like to be.
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Does Car Insurance Cover Rental Cars
In most cases, your auto insurance policy will provide equivalent coverage for a rental car as long as you use it for personal purposes. For example, if you have comprehensive and collision insurance, your rental car will likely be covered if its damaged, stolen or totaled, as long as the rental is of similar value to your own vehicle. Your deductible, a predetermined amount subtracted from the claim payout, will still apply if you file a claim with your insurer.
Liability insurance pays for injuries or property damage you cause to others in a crash, up to your policy limits. Your own injuries and any damage to your rental car aren’t covered.
If you dont have comprehensive or collision coverage, or youre renting a luxury vehicle that your insurer wont cover, you can purchase a loss-damage waiver, or LDW, from the rental company. An LDW waives your financial responsibility for the rental car if its lost or damaged, as long as you abide by your rental agreement.
If you have only your states minimum-required coverage, consider purchasing additional coverage at the rental car office. State minimums typically have low liability limits. Without sufficient coverage, you could be left to pay thousands after a crash.
Be sure to check with your insurer to confirm your policy covers rental cars before you head to the rental car office. Some insurance companies personal car insurance policies wont cover rental cars.
» MORE: Minimum car insurance requirements by state
Roadside Assistance Coverage Or Protection
If you add roadside assistance coverage or protection to your rental car insurance, youll be covered for up to a certain amount for lockouts, battery changes, fuel delivery, and more. If you already have a third-party roadside assistance service like AAA, you probably dont need to spring for roadside assistance for your rental car.
Cost of roadside assistance or protection: $8 to $10 per day
Who should get it: Drivers who are willing to pay a little extra to ensure theyre covered in the event of a breakdown.
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Alternative #: Use Credit Card Benefits
These days, most credit cards provide free collision coverage for car rentals, provided you use the card to secure the rental. A sample credit card benefits statement describes coverage as:
Physical damage and/or theft of the covered rental vehicle. Valid loss-of-use charges assessed by the rental company while the damaged vehicle is being repaired and is not available for use, as substantiated in the companys fleet utilization log. Reasonable and customary towing charges related to a covered loss to take the vehicle to the nearest qualified repair facility.
Note that this typical Visa cards benefits do not cover diminished value or administrative costs. A few premium credit cards offer primary collision coverage, meaning the card takes full responsibility for the payment. But coverage on most cards is secondary, meaning the card picks up only what you cant first recover from your own insurance. And you still have to pay the rental company up front, then file for reimbursement from your card issuer.
Another gotcha in the above fine print: This card pays for loss of use only if verified by the rental companys log. Unfortunately, some rental companies dont cooperate with credit card issuers in providing this type of documentation in a timely manner.