When you go up to the counter at the car rental kiosk, you give them your driver’s license and credit card, sign some papers, and get asked the terrifying question: “do you want insurance?”
The deer-in-the-headlights feeling.
And so the salesperson at the desk begins their sales pitch, warning you about the possible consequences of not buying their company’s rental car insurance.
Since you are put on the spot, with a line of weary and possibly frustrated travelers behind you, you may not feel quite confident about what your current auto insurance covers.
And you probably didn’t know that the salesperson gets a commission for selling you that coverage.
Here is an explanation of typical rental car insurance and why/when you may want or need it.
Your rental car is stolen or you get in a crash.
The rental car company will try to sell you insurance that will release your end of the bargain for any damage or theft. This is typically called a “loss-damage waiver (LDW)” or a “collision damage waiver (CDW)”. Note: these are not insurance at all- they are just waivers saying the rental company won’t come after you. This coverage costs approximately $9-$19 per day.
If you have comprehensive or collision on your own auto policy- it will generally extend to your rental car. (Your deductible will still apply).
Most insurance companies won’t allow you to insure two cars on one policy. This means that your insurance transfers to your rental car as long as your car at home is not being used. But if your car at home is being used (because you have lent it to someone or because you normally share the car with someone who is not with you)- then technically, the insurance company is now insuring two cars for the price of one, which isn’t really fair to the company. So this works great if your car at home is sitting in the garage or in the Airport Park and Ride. It does not work so great if you are letting your sister borrow the car (even if she has her own insurance).
One thing that many insurance companies will not do that a CDW or a LDW will do is that they cover the cost of the car rental company’s loss of revenue while the car is being fixed. Since they can’t use the car while it is out of commission- they are out money. Someone has to make the company “whole” again- and the CDW prevents the company from making that person YOU.
You rear end someone else – or you damage someone else’s property
Rental car companies have “supplemental liability protection” that will pay for any of your liability while in their car. A typical limit is $1 million. If you do not have auto insurance, this is a good buy at the rental counter. Car rental company liability coverage can run you from $7-$14 per day.
If you have auto insurance, your own liability insurance will cover you (again, as long as your car is staying put at home). If you have very low limits (ie. Wisconsin State Minimums) you can use the rental car company’s supplemental liability protection to increase your coverage in case you get sued. *
Injuries to you or your passengers
The rental car company usually has something called “personal accident insurance” which will help to cover medical costs for you and your passengers in an accident; however, if you have health insurance, your health insurance would pay for this anyways. This type of insurance can add on $1-$5 daily.
Additionally, if you have auto insurance, you likely have Medical Payments on your policy which would kick in.
Your stuff gets stolen out of the car.
The rental car company may have a coverage that is called “personal effects coverage” which will pay for your stuff if stolen out of the car- up to a set dollar amount. If you have homeowners or renters insurance, these would likely be covered under those policies, even away from home.** Personal effects coverage can run between $1-$4 per day.
Many times, if you are paying for your car rental with a major credit card, the credit card company will also have additional rental car coverages, which is an awesome perk. To find out, you can call the number on the back of the card you are going to use for the car rental.
So there are certain instances where car rental insurance is a good idea.
- If you do not have auto insurance
- If you do not have adequate limits on your auto insurance
- If you are lending your car to someone while you are on vacation or you share the car you have insured
- If your current policy does not have collision or comprehensive (like if you have an older car and have dropped collision – or – if you have minimum limits which doesn’t require collision or comprehensive)
- You’re only listed under a commercial driving policy (you usually drive a company car)
- You have high deductibles on your personal insurance (because the car rental insurance doesn’t have deductibles at all)
Otherwise, adding the extra coverages can be a waste of money.
If you are planning to rent a car in the near future, take a few minutes to find out if your existing auto insurance, credit card company, health insurance, and/or renters or homeowners insurances have what you need.
* If you are worried that your limits are too low, you should be raising your liability coverage with your personal auto insurance!
** To make a claim on your homeowners or renters insurance policies for theft, you would have to file a police report and you will have a deductible. It is a good idea to consider the value of the property stolen before starting a claim on a new type of insurance.