Buying Rental Car Insurance: What To Know Before Hitting the Road

As air travel and international travel is limited these days, many people are looking to road trips as a vacation alternative. Destinations that offer outdoor activities are at the top of many travelers’ lists. If you’re  thinking of renting a car to reach your destination, here’s what you should know about purchasing rental car insurance. 

Even though you may find a great deal on a rental car, you may be surprised at the actual total cost to rent the car. Rental car companies will tack on additional fees and rental car insurance driving the cost up. Before you sign on the line at the rental car agency, find out about other rental car insurance options that could save you money. 

What is rental car insurance?

Rental car insurance protects you in case you are in an accident with a rental car. Car rental companies won’t let you rent a vehicle without knowing that potential damages are covered. In most cases, you’re driving an unfamiliar car in a new location - and accidents can happen. What’s more, especially in summer, there is typically more road construction and a higher number of people on the roads leading to heavy traffic.

If you don’t have your own car insurance, or sufficient insurance, don’t worry. Car rental companies offer a selection of insurance products you can purchase from them. Keep in mind, rental agencies charge a daily fee on each insurance product they offer.

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Here are four standard insurance products offered by car rental companies:

• Liability insurance - Similar to personal liability auto insurance, this basic package offers compensation for medical expenses or property damage resulting from an “at-fault” accident.
• Collision damage waiver (CDW) - This type of insurance is like a temporary placeholder for collision and comprehensive auto insurance. It covers peril damages (deer, theft, vandalism, fire, hail, wind, etc.) and the total cash value of a vehicle when damaged in a collision.
• Personal accident coverage - Much like the personal injury protection (PIP) auto insurance coverage, this type of insurance is meant to pay driver and passenger medical bills that result from a vehicle crash. 
• Personal effects insurance - This type of insurance pays for the value of personal items stolen from the rental vehicle and can be covered by a homeowner’s or renter’s insurance policy.

Do you need to buy it?

You must have insurance to rent a car, but whether you need to buy it from the rental car company depends on your current coverage. First, figure out if your auto insurance policy includes rental protection. If you have a major credit card, check the benefits to see if offers any rental car protection.

• Does your car insurance cover rental cars?
• What additional coverages do you have on your policy for rental cars?
• Do you have a credit card that covers insurance for rental cars?

Remember to factor in the extra costs if you are buying insurance from the rental car company. Some companies charge $30 per day for just the CDW insurance. A week-long rental could end up costing you $210 per week just in fees. Bill Wilson, an insurance expert, chartered property casualty underwriter, and founder of InsuranceCommentary.com says, “It’s usually more than the cost to rent the car.”

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What to look for in your current coverage

Even if your auto insurance includes car rental protection, you may have to adjust some details on your policy. First, check your comprehensive and collision coverage levels.

Without comprehensive or collision insurance, you might not be able to pay for some of the damages that occur to your rental car if you’re involved in an accident. The reason is due in part to the nature of the crash and the extent of damage done that isn't covered by general liability auto insurance. For example:

• Other drivers involved in a collision may not have insurance, or you may be at fault in the accident, leaving you to pay all of the damages to your rental car.

The other part of your auto insurance policy you might want to check out is coverage for administrative or towing fees. If you total the vehicle and it gets towed, you may be paying even more for the towing service than you would just to rent the vehicle.

How do credit cards cover car rental insurance?

If you don’t use the benefits on your credit cards for vacation or travel, you should start considering it. Many of the top credit cards have a variety of travel benefits, cash-back rewards and discounts if you book your entire trip with them.

And, you may have guessed it - they usually include rental car insurance coverage. Here are some examples of the rental car insurance coverages and benefits that come with credit cards.

American Express Platinum - Premium car rental programs, including special upgrades and discounts.

Chase Sapphire - Earn reward points to pay for car rentals, hotel accommodations, airline tickets, activities, and cruises.

Capital One (VentureOne) - Covers theft or collision loss when renting an eligible vehicle

“Before you go off on your trip, you should check with your credit card company to see what your specific credit card offers you when it comes to collision damage,” says Bill Hardekopf, CEO of LowCards.com.

Keep in mind that the rental car insurance from your credit card will kick in only after other forms of insurance have been exhausted, such as your personal auto insurance. If you need to make a claim, you’ll first have to contact your auto insurer. After that, your credit card will usually cover remaining costs.