Do I Need Insurance for my Rental Car? Here are the Facts.

Renting a car offers freedom and flexibility, but the decision about whether to buy rental car insurance can be confusing. Should you rely on your personal auto policy, credit card coverage, or purchase insurance from the rental company? This guide breaks it down, helping you make the best decision for your needs and budget.

What does my personal auto insurance cover?

Whether or not you need to secure coverage through the car rental company depends on the specifics of your personal auto policy. In many cases, car insurance policies will extend coverage to rental vehicles. For instance, if your personal policy includes comprehensive and liability insurance, then this coverage will likely apply to rental cars as well.

However, keep in mind that the value of the rental car will impact your coverage.  If you are planning on renting a luxury vehicle or a car that’s worth more than your personal vehicle, then your existing insurance will not be adequate.  In this case, you should supplement your existing coverage with the insurance offered by the rental company.

If you already have auto insurance, your policy may extend to rental cars. Here’s how:

Liability Coverage: Most personal policies provide liability coverage for rental cars. This covers damages or injuries you cause to others.

Collision and Comprehensive Coverage: If you have this on your policy, it likely applies to rental vehicles, covering damage from accidents, theft, or weather.

Exclusions: Double-check for exclusions such as exotic vehicles, off-road use, or international rentals. 

What does rental car insurance cover?

If you want to secure additional coverage through the rental car company, then it’s important that you understand the types of coverage that they offer.  Typically, car rental companies offer four main types of coverage: liability, personal accident insurance, Collision Damage Waiver (CDW)/Loss Damage Waiver, and personal effects coverage.

Liability: Covers the cost of third-party injuries or property damage that you may be responsible for. As your personal auto policy already offers liability insurance, you probably do not need to secure this coverage from your car rental company.

Personal accident insurance: Covers your medical expenses should you be injured in an accident. If you have personal injury protection or medical payments on your existing auto policy, then you do not need to secure this coverage from your car rental company.

Collision Damage Waiver (CDW)/Loss Damage Waiver: Rather than an insurance product, this waiver transfers financial responsibility from you to the car rental company in the event that the rental car is damaged or stolen. If you are renting a car, then it’s recommended to secure this waiver.

Personal effects coverage: Covers the personal items that are stolen out of your rental car. Before you secure this coverage from your car rental company, review your homeowners, renters, or condo insurance policy. In some cases, these policies will offer coverage for items stolen out of your rental car.

Does Your Credit Card Provide Rental Insurance?

Many credit cards offer rental car insurance as a perk, which can save you money. However, coverage varies widely:

Secondary Coverage: Most cards offer secondary insurance, which kicks in after your auto insurance.

Primary Coverage: Some premium cards, such as travel rewards cards, provide primary rental car insurance.

Exclusions: Common exclusions include luxury vehicles, long-term rentals, and rentals in certain countries.

Do you need rental car insurance when traveling abroad?

Your personal auto insurance and credit card coverage may not extend to rentals outside your home country. In such cases:

Check Your Existing Policies: Some insurers offer international coverage as an add-on.

Consider Local Insurance: Rental companies abroad often require proof of coverage or mandate purchasing their insurance.

Review Local Laws: Some countries, such as Mexico and Italy, have mandatory insurance requirements.

When should you consider additional rental car insurance?

There are specific situations where buying rental insurance makes sense:

No Personal Auto Insurance: If you don’t own a car, you may lack coverage.

High-Value Rentals: For expensive or luxury cars, additional insurance can protect you from steep repair costs.

Extended Rentals: Long-term rentals might not be covered by personal or credit card policies.

Business Rentals: Your employer’s policy may provide coverage, but confirm in advance.

How to decide: Key Tips for choosing coverage

Follow these steps to make the best decision:

Assess Your Current Coverage: Check your auto insurance and credit card benefits.

Evaluate the Rental Car’s Value: Expensive cars might warrant additional protection.

Consider Your Destination: International rentals often require added coverage.

Factor in Peace of Mind: If uncertain, purchasing a waiver or insurance might be worth it.

FAQS about rental car insurance

Q: What is the difference between CDW and LDW?
A: CDW (Collision Damage Waiver) and LDW (Loss Damage Waiver) both relieve you from financial responsibility for damage or theft of the rental car, but they are not technically insurance.

Q: Does my credit card cover rentals internationally?
A: Some credit cards do, but coverage varies by country. Contact your provider to confirm.

Q: Can I rely solely on my credit card for rental insurance?
A: Yes, but only if it offers primary coverage and you understand the exclusions.