Does car insurance cover rental cars?

What is rental car insurance?

Rental car insurance is coverage that protects you when you drive a rented vehicle. It can come from your personal auto policy, the rental company, a credit card or a third-party policy. The coverage that applies depends on the rental purpose, vehicle type, location and policy terms.

Rental car company coverage terminology differs from your personal auto policy. Personal policy terms include liability, collision and comprehensive coverage. Rental companies sell products such as loss damage waivers, collision damage waivers, supplemental liability protection, personal accident insurance and personal effects coverage.

Comprehensive and collision coverage vs. damage waivers

Comprehensive and collision coverageCollision coverage helps pay for repairs or replacement of your car if it's damaged in an accident, regardless of who is at fault and is subject to a deductible. come from your auto policy and pay for covered damage to a rental car, minus your deductible. A collision damage waiver or loss damage waiver comes from the rental company and waives covered damage or theft charges under the rental agreement.

You can purchase a loss-damage waiver (LDW) or collision damage waiver (CDW). In case of theft or damage, you walk away and leave the rental car company to deal with the issue.

Damage waivers aren't actually insurance. According to the National Association of Insurance Commissioners (NAIC), "Because CDWs are not regulated as insurance, car rental companies can essentially charge any amount they wish." You're not buying insurance -- you're paying the rental company to waive its right to pursue repayment from you.

Auto liability coverage vs. rental car supplemental liability protection

Your auto liability coverage may extend to a rental car and pay for injuries or property damage you cause to others, up to your policy limits. Supplemental liability protection adds extra liability coverage from the rental company when your limits are low, or your policy does not apply.

The rental car equivalent of your personal auto liability coverage is supplemental liability protection. You can typically purchase up to $1 million worth. Some companies offer "extended" supplemental liability coverage with higher limits (up to $2 million is typical).

Because New Hampshire does not require drivers to have liability insuranceLiability insurance covers sums that an insured becomes legally obligated to pay because of bodily injuries or property damage, or financial losses caused to other people., rental car companies include basic liability insurance as part of every rental contract.

PIP or MedPay vs. rental car personal accident insurance

Personal injury protection, medical payments coverage, or health insurance will pay medical costs after a rental car accident; which coverage applies depends on your policy and state. Rental car personal accident insurance provides medical and accidental death coverage for you and passengers when you buy it at the rental counter.

Personal property coverage vs. personal effects coverage

If you have homeowners or renters insurance, your valuables are covered from theft, damage or loss, even when you're away from home. You'll need to check your coverage limit; off-premises coverage is usually restricted to a percentage of your total coverage.

Personal effects coverage reimburses you, up to a specific limit, if your belongings are stolen from the rental car. If you're planning on traveling with expensive luggage or equipment, the coverage could be a lifesaver.

Does my car insurance cover rental cars?

Your car insurance will cover a rental car when the rental is for personal use and the vehicle fits your policy's rules. Your liability, comprehensive and collision coverage will extend to the rental with the same limits and deductibles. Business rentals, long-term rentals and certain vehicle types need separate coverage.

Do I need to buy additional insurance when renting a car? If you have full coverage on your personal car, the comprehensive, collision, medical payments, excess liability (umbrella) and liability coverage will also apply to your rental, saving you from having to buy additional insurance. However, there are a few things you should watch out for:

If you're renting for commercial or business purposes, your personal car insurance coverage may not apply.
If you're renting a vehicle considered to be commercial (such as a van) your auto insurance policy may not provide protection.
Your auto insurance policy might not cover the rental agency's administrative fees, towing charges, compensation for the loss of use of the vehicle while it's being repaired or its diminished value.
For longer-term rentals (one week or longer), your current insurer might impose limits.

Is it necessary to buy rental car insurance at the counter?

Rental car insurance 2 You need rental counter coverage when your personal policy, credit card and other coverage do not protect the rental. Buy it when you have no car insurance, carry liability-only coverage, rent for business, rent overseas or want the rental company to handle covered damage.

In fact, many personal finance experts advise most people to pass on insurance offered at the rental counter. This doesn't mean you should skip insurance altogether.

There are times when you're better off buying the rental car insurance coverage at the counter:

You don't have car or vehicle insurance.
To protect your premiums: some rental coverage is primary, replacing your auto insurance policy. If you have an accident, not making a claim with your insurance company will keep your record clean and insurance premiums down.
Your own insurer restricts your coverage because your trip is business-related.
If you're renting a vehicle that's labeled as commercial by the rental agency. Personal car insurance policies don't typically insure commercial vehicles.

You have the minimum required liability coverage in your state, and it's much less than the minimum required where you're going.
Your own insurer limits your coverage because you're renting for a week or longer.
Your insurance company won't cover all rental agency costs in the event of an accident.
You're traveling with expensive belongings or equipment and have no coverage or insufficient coverage from your home or renters policy.
Your deductible on your regular auto policy is very high, making the CDW more attractive.

Three additional rental car insurance coverage options

You have three main alternatives to rental counter coverage: credit card rental benefits, third-party rental car insurance and an add-on from your auto insurer. Each option covers different risks, so check damage coverage, liability, deductibles, exclusions, claim steps and rental length limits before you decline counter coverage.

1. Coverage through your credit card

Rental car insurance coverage may be available if you rent using a credit card, especially a premium or travel rewards card. Credit card companies vary wildly in what they cover (and don't cover). Most major credit cards offer some form of rental car insurance. Usually, it's secondary coverage, meaning you still have to report the accident to your primary insurer, and then the secondary policy picks up some of the remaining costs. Some of the higher-end cards also offer primary coverage.

To get the free rental car insurance coverage from most credit card companies, you need to make sure you do the following:

Charge the entire rental to the card
Decline additional insurance at the rental agency
Rent the vehicle in your own name

You should also know:

Your coverage probably doesn't include reimbursement for administrative costs, taxes, and any diminished vehicle value.
Vehicles used for off-road fun are often excluded. Ditto expensive sports cars and luxury vehicles.
The secondary insurance coverage means you still have to file a claim with your primary insurer. You may have to pay costs upfront and be reimbursed later.
If you're liable for damage, the credit card may not cover your replacement rental.
Some cards exclude coverage for "loss of use" charges imposed by rental agencies. Check the fine print.
You'll have a limited time following the incident to make a claim for reimbursement -- 30 or 45 days is normal.
Coverage may only apply for a limited number of days. For instance, Visa covers rentals up to 15 days long in the US and 30 days overseas.

2. Third-party rental car insurance coverage

There are insurers that write standalone rental policies, allowing you to purchase coverage before you take a trip. They're known as third-party rental car insurance companies. You can get quotes and buy rental car insurance online. Coverage is typically cheaper than the car insurance you'd buy at the rental desk, making the option worthwhile.

Allianz Travel offers standard rental car insurance coverage for a rental vehicle up to $40,000 in value with a 32-year-old driver for $9 per day.

3. Adding a rider through your vehicle insurance

Another option involves asking your current auto insurance company to sell you a rider for your trip to plug any coverage holes you find. The add-on may cost as little as $50 a year -- less than a few days of coverage at the rental counter.

How much does rental car insurance cost per day?

Rental car insurance adds about $20 to $40 a day, depending on the coverage options you select at the counter. A loss damage waiver, supplemental liability protection, personal accident insurance and personal effects coverage are priced separately. The final cost depends on the rental company, location and coverage choices.

Loss-damage waiver (aka collision damage waiver): $10 to $20 per day
Supplemental liability coverage $1 million: $7 to $15 per day
Personal accident insurance: $1 to $5 per day
Personal effects coverage: $1 to $5 per day

Rental car insurance checklist

A rental car insurance checklist helps you decide what coverage to buy before you reach the counter. Review your auto policy, credit card benefits, rental purpose, rental length, destination, deductible, liability limits and personal property coverage. Confirm these details before you decline or accept rental company coverage.

Verify this information before renting a car to save yourself time, angst and money.

Is my trip for business or personal reasons?
Will I be renting for a week or longer?
Does my current auto policy (or non-owner auto policy) apply to this rental?
Do any of my credit cards offer additional or better coverage if I use them to pay for my rental car?
Do I have to decline coverage at the rental counter for these coverages to apply?
Do I have medical coverage through my auto or health insurer?
Do I have homeowners or renters insurance to protect my personal belongings?
Is my rental part of a travel package, and is insurance included?
Does my auto policy cover rental agency administrative costs, loss of use and other expenses?

Rental car insurance for international travel

You may find that your U.S. auto insurance policy excludes coverage in foreign countries. You can fill the gap by purchasing rental car insurance from the rental agency, a standalone policy, or through your credit card.

However, check your credit card benefits first. One real advantage they offer is coverage in many overseas locations. MasterCard, for instance, offers rental car coverage in countries worldwide except Ireland, Israel, or Jamaica. MasterCard says that you may be unable to receive benefits in Australia, Italy, or New Zealand.

How to file a rental car insurance claim

To file a rental car insurance claim, report the accident to the rental company, insurer or card benefit administrator right away. Gather the rental agreement, accident report, repair estimate, photos, police report, and payment proof. Credit card claims also require proof that you paid with the eligible card.

Report the incident to your agent, rental company, or plan administrator ASAP.
Provide a copy of the accident report form, repair estimate or itemized repair bill, photographs of the damaged vehicle, if available, police report, if obtainable, and other documentation needed to prove your claim.
Provide a copy of the rental agreement showing that you declined the offered coverage.

For secondary coverage from a credit card or other policy, you'll also supply:

A statement from your insurance company showing the costs you owe and any amounts that have been paid.
If you have no other insurance, you'll need a notarized statement that no insurance or reimbursement applies.
A copy of the declaration page from your automobile insurance carrier.
Proof that you paid for the rental in full with your credit card.

In most cases, that's all you need to do. Once you file a claim and submit the paperwork, you can expect payment in as little as two weeks.

FAQ: Rental car coverage

Does my personal car insurance cover rental cars?

Yes. If you carry collision and comprehensive coverage on your personal auto policy, those coverages generally extend to a rental car used for personal travel in the U.S. and Canada. Your liability coverage also typically follows you. Check your policy for any exclusions or limits before renting.

Do I need to buy the rental company's insurance?

Not always. If your personal auto policy already covers rental cars and your credit card provides rental car protection, you may not need every coverage the rental company offers. However, you should review your existing coverage to identify any gaps before declining optional protection.

Does full coverage include rental cars?

If your policy includes collision and comprehensive coverage, those protections generally apply to a rental car, subject to your policy's deductible and limits. "Full coverage" is not a specific insurance product, so verify exactly what your policy includes.