Car rental companies want you to rent their cars, but they are rightfully concerned that their vehicles be returned just as they were rented, except for the miles that are put on them of course. If you are in an accident while driving a rental car and do not have the right coverages to pay for the accident, or for the company's loss of use of the vehicle while it is being repaired, then be prepared to pay for these items yourself - and the cost is likely to be a lot.
Now what car insurance should you buy when you are renting a car? It depends. We would like this to be a simple one or two paragraph answer, but it is not quite so easy for this question since there are a lot of factors involved in deciding about insurance for a rental car.
If you own your own auto, your state requires you have at least a minimum of liability coverage to comply with state law and to allow you to provide financial responsibility toward other drivers. If your auto is financed, your bank, credit union, or finance company will require you to carry comprehensive and collision coverage, also known as "physical damage" insurance.
Your policy should have information regarding whether or not your coverage will apply to a rental car. A simple call to your agent is the easiest solution. Most policies include coverage to extend to rental cars. If not, or you cannot find the information on your written policy documents than call your insurance company so one of their agents can inform you of what your policy provides. This is important for you to know for future reference.
Most policies extend coverage to at least the value of the car on the policy. Therefore, if you have a $10,000 car then you would have at least that amount of coverage toward your damaged rental car. You should also ask your insurance provider if it makes a difference if you are renting the car for personal or business reasons. Sometimes if it is a business trip, your coverages may not be extended as if they would be for just a personal vacation trip where you rent a car.
If you do not have coverage from your personal auto insurance or if you do not own a car so thus have no car insurance to apply to a rental car then you will need to get insurance to cover the rental car. If you must buy car insurance for your rental car, it is expensive, costing $9 to $20 per day or more. Especially if you are a frequent renter due to business trips, this can add up to a lot of money fast. Having your own insurance policy on your vehicle that covers rental cars is an ideal way to go. However, you may not own a car, so then what are your options?
For liability insurance purposes to cover a rental car, you can purchase from most car insurance companies a "non-owners" liability policy. Before you buy that type of policy, make sure that it will cover any rental vehicle you might need to rent. Policy terms vary so check with the insurance carrier when buying your non-owners policy about this rental car issue specifically.
The cost for this type insurance coverage varies greatly depending on your driving record, but if you don't have violations and some driving experience it costs somewhere in the neighborhood of $200 to $300 per year, and can be well worth it if you are a frequent renter and have no car of your own to place regular insurance upon. Most of these policies do not cover business use of a rental car so if that is a factor you will want to know about as well. In addition, these policies do not cover the actual damage to the rental car. This type of policy only provides liability coverages so just the damage you may cause others is covered and not the rental car itself.
Rental car companies want you to rent cars from them but also want to know you will return the car in the same condition it left in except of course for the miles put on during the rental period. A rental car company may check your Motor Vehicle Record and your credit history, but this is not typical. They may however contact your insurance company, if you do have coverage, to confirm with them that the rental car is covered.
If you are renting a car, the insurance issue is not something that you would want to leave "hanging". You definitely want to have this nailed down with your insurance company before you arrive at the rental car agency to pick up your car. A typical vehicle you are renting can cost from $11,000 to $30,000, so the company renting the vehicle will want their car protected.
Some credit card companies will cover you for the physical damage part of the car rental if you use their card to pay for the rental. Check with your credit card company about this possibility too. There may be certain exclusions to when your credit card's coverage would be in force so make certain you are aware of all the aspects of your credit card's coverage before renting a car and just assuming your credit card will pay out for an accident.
In some cases, it is much better to take the (unfortunately) more expensive daily insurance coverage of the rental company and let it be their responsibility if you have an accident. The consequences are very high if you can't pay for any damage done to the other driver, or to the rental vehicle. Here are some types of insurance that rental car agencies offer.
Collision Damage Waiver (CDW), in states that allow it, is an optional coverage that rental car companies normally offer for around $10 to $15 a day. It is called collision damage coverage however it is more of a guarantee that the rental company will pay for damages to your rented vehicle that it may sustain. If you decline the waiver, you accept responsibility for any damages.
CDW does not pay for bodily injuries or damages to you or your personal property. If you do not buy CDW coverage or are not covered by your personal auto insurance policy, you could be liable for the full value of the car. Be sure to read the exclusions of any CDW contact you sign with a rental car company.
Some CDW's exclude coverage under certain circumstances. For example, coverage may be invalid if you damage the car when driving it in a negligent manner, on unpaved roads, or out of the state in which you rented the vehicle. Some companies void their CDW coverage if a driver drinks alcohol or if a non-authorized driver operates the car.
In addition to CDW coverage rental car companies offer many other optional coverages such as personal accident insurance (PAI) which pays a death benefit and portion of your medical expenses if you are in an accident. If you have health insurance or other coverages that take care of this then it likely would not be needed for a rental car.
To find out what insurance options are available to you from the rental company you plan to use trying check with their website. Usually if you are using a national chain, they will list online what your base rate includes as well as what optional coverages are available. You then should speak with your own insurer to see if any coverage is extended to you from your personal auto insurance policy. With all of the knowledge you should be able to determine what insurance coverages a rental car company offers is right for your situation.
Sometimes the best solution is to buy insurance from the rental car agency so that you are not left personally responsible for damages to the rental car or to others you may damage when you are at-fault in an accident.
If you are unable to pay, under normal circumstances the rental car company will get a legal judgment and a lien against you, so it is messy to have this happen. It can foul up your credit rating and driving history for quite some time, as well as cost you thousands of dollars. Remember the rental car company will likely not only want their vehicle repaired but want paid for the loss of service for the time that vehicle was being repaired instead of rented out and making them money.
If you rent a car and do not have the right coverages for an accident, it can cause you a lot of grief and financial heartache. Driving without insurance can only lead to a negative result and there are more serious consequences when the car you are driving is not even your own, so make sure you have coverage whether driving a rental or your own vehicle.
For what it is worth, as an agent I have never purchased the rental car coverage that is offered to me by the rental car company. My policy extends coverage to rental cars up to my liability limits and the physical damage. A simple call or review of your auto policy can save you time and money at the rental car counter.