Do you need car insurance to rent a car?

Do you need car insurance to rent a car?

You do not need a personal auto insurance policy to rent a car, but you need to understand what’s covered by the rental company and what you’re responsible for. Rental companies such as Enterprise allow customers to rent without personal auto insurance, and will offer you optional protection products at the counter. Availability and terms differ by rental company. 

In general, rental car companies provide state minimum liability coverage on the vehicles they rent. The exact amount will depend on the rental company's policy and the state where you rent the vehicle, according to Brian Savoy, senior manager, physical damage/estimatics for Metromile.

That coverage doesn’t provide protection for damage to the vehicle. If you don’t have insurance, you should consider your options for physical damage protection. Those include credit card coverage and the policy sold by the rental car company.

Is it necessary to buy rental car insurance?

No, you don't have to buy rental car insurance, but if you don't have your own insurance, you're taking a big risk. Rental car companies generally provide only state minimum liability coverage, which provides limited coverage for damage and injuries to others.

There is no coverage for r damage to the vehicle itself, your injuries or injuries to your passengers, except in no-fault states that require personal injury protectionPersonal injury protection (PIP) pays for your medical, hospital and funeral expenses resulting from a car accident, regardless of who's at fault.. State minimum limits are low, and may not be adequate in even a moderately serious accident. Before renting, consider the risk you are willing to take if you don't purchase additional coverage.

If you have a full coverage policy on your own vehicle, you can use it when driving a rental car and skip purchasing any additional coverage; just check with your insurance company first.

What happens when renting a car without car insurance?

If you rent a car without personal auto insurance, you are responsible for losses not covered by the rental agreement or protection products you buy. A serious accident can leave you paying for third-party injuries, property damage, rental-car repairs, theft, towing, administrative fees and loss-of-use charges. 

That's true even if you buy the minimum amount of coverage required, but don't have enough coverage in an accident. For example, liability insurance pays for property damage and bodily harm you cause to others, but your personal property and medical bills aren’t covered. That's why it's important to be sure you have adequate insurance coverage for the vehicle and situation.

What rental car insurance options do you have?

You can get coverage for a rental through your personal auto policy, rental-company products, a non-owner liability policy, third-party coverage or credit card benefits. No single option covers every risk. Compare liability, vehicle damage, medical expenses, personal property, deductibles, exclusionsItems that are specifically denied coverage under the terms of an insurance policy. For example, most auto insurance policies exclude coverage for normal wear and tear, drag racing and intentional acts. and claims procedures before choosing your coverage.

Use your personal insurance policy

Your personal auto policy can extend liability, collision and comprehensive coverageComprehensive coverage helps pay for damage to your car caused by events other than a collision, such as theft, fire, vandalism, or natural disasters. It is subject to a deductible. to a temporary rental car used for personal travel. The same coverage limits and deductibles on your insured vehicle generally apply. Confirm the extension before renting because policy language, territory and vehicle restrictions differ.  

"It typically depends on the insurance carrier and the policy you have," Savoy said. "Most major insurance carriers do transfer, but you should first check with your individual insurer to clarify coverage."

That's because there may be some restrictions in place. For example, your policy may only cover a rental car for a certain period, such as one week, or only within the U.S. and Canada. The type of vehicle you're renting also matters. It's common for specialized vehicles such as trucks, motorcycles or commercial vans to be excluded, as well as luxury vehicles. Additionally, vehicles rented for business use are often excluded from coverage.

Another thing to consider is that if you rely on your personal auto insurance provider, you'll need to pay your deductible if you file a claim. However, if you're already paying for a full-coverage policy, which includes collision and comprehensive coverage and costs an average of $2,578 per year, it probably makes sense to take advantage of your coverage when renting, too, if you can.

Buy non-owner car insurance 

Non-owner car insurance provides liability coverage when you drive cars you do not own. The coverage is secondary to the owner’s insurance and applies when that policy’s limits are exceeded. It does not cover physical damage to the rental vehicle, so you still need a damage waiver, credit card benefit or separate damage policy.

A non-owner policy can also include uninsured or underinsured motorist coverage and medical coverage, where available. It does not replace:

• Collision coverage
• Comprehensive coverage
• A rental company damage waiver
• Personal effects coverage
• Roadside assistance

This coverage is more useful for frequent renters than for someone taking a single short trip. Compare its annual cost with the price of buying supplemental liability coverage for each rental. 

Buy coverage directly from the rental company

You can buy rental car insurance directly from a rental car company. But what most people think of as rental car insurance isn't actually true insurance at all. Rather, a rental car company's insurance is one of several types of damage waivers that cover rental cars:

• Collision Damage Waiver (CDW): Also known as a Loss Damage Waiver (LDW) or Physical Damage Waiver (PDW), CDW covers damage or theft of the vehicle.
• Supplemental Liability Protection (SLP): This usually provides $1 million of liability protection, much more than most drivers have under their own insurance policies.
• Personal Accident Insurance (PAI): This coverage provides medical, ambulance and death benefits for the rental's driver and passengers if the car is involved in an accident.
• Personal Effects Coverage (PEC): This provides additional coverage for any personal belongings in the car that are stolen. Typically, this coverage kicks in after you've used your own insurance policy benefits.

"It may make sense to pay for added coverage from the rental company when you are traveling abroad," Savoy said.

You might also want to purchase rental car insurance to protect your existing insurance policy premiums from going up if you have to file a claim or you want to increase your coverage levels.

How much does rental car insurance cost from rental companies?

The average cost of rental car company insurance is  $20 to $40 per day. Below is a closer look at the typical costs associated with rental car insurance:

• Loss-damage waiver (aka collision damage waiver): $15 to $40 per day 
• Supplemental liability coverage with a $1 million limit: $7 to $15 per day
• Personal accident insurance: $5 to $10 per day. 
• Personal effects coverage:$3 to $6 per day 

Purchase a standalone policy

If you don't want to go through your own insurance or buy directly from the rental company, you can also buy a rental insurance policy from a third-party company, such as Allianz Travel or Insure My Rental Car.

These policies tend to be cheaper than the waivers offered at the rental desk, ranging from $8 to $12 per day. You usually need to decline the rental company's insurance to use a third-party policy.

Take advantage of your credit card benefits

Some credit cards include coverage for damage to or theft of a rental car when you pay for the entire rental with the card and decline the rental company’s collision or loss damage waiver. Credit card protection does not cover third-party liability, injuries, or every vehicle and destination. 

Additionally, most cards offer secondary coverage, according to Savoy.

"Your own auto insurance company would have to handle the initial claim, and anything not covered could possibly be covered by the credit card," Savoy said.

However, a few higher-end cards offer primary coverage, meaning you don't have to go through your insurer at all.

Keep in mind that there may be a limit on the number of days your credit card's insurance will cover your rental (usually two to four weeks, depending on the location). Some countries are often excluded from coverage as well, such as Ireland, Jamaica and Israel. And certain specialized vehicles may be excluded, too.

Finally, certain charges typically aren't covered by a credit card's rental car insurance, such as loss-of-use and diminished value expenses.

What do you need to rent a car?

Rental requirements differ by company and location, but you need a valid driver’s license, an accepted form of payment and enough funds for the required deposit. Some companies require drivers to be at least 25 years old.

The exact rules vary by the rental agency, but in general, you must also meet the following requirements to rent a car:

• Have a valid driver's license with a photo
• Be at least 25 years old (or pay a young driver fee)
• Pay with a credit or debit card

Helpful auto insurance tools and calculators

• Car insurance rates by vehicle
• Compare car insurance companies
• Auto insurance coverage calculator
• Speeding ticket calculator
• Traffic ticket calculator
• Used car insurance calculator
• Rideshare earning calculator
• Pay per mile calculator