Rental car agencies have a menu of insurance policies they would like to sell you. Each policy could be of some benefit under the right circumstances.
But you may not need to buy this additional coverage if you already have car insurance on your personal vehicle.
Liability if you cause a crash: In general, most auto insurance companies will extend your liability coverages to a rental car in the same limits that you have on your own personal auto insurance policy.
Damage to the rental car: Comprehensive and collision coverages you have on your personal vehicle should remain in effect, with the same deductibles.
Not all policies will extend coverage to rental cars. A review of your policy and a quick call to your agent should verify that your coverages will cover a rental car. (See "7 gotchas of cheap car insurance" for more information on other restrictions more common in cheap policies.)
The risks to you: If you turn down optional coverages to rely on your personal auto insurance:
- A claim on your policy could increase your rates.
- You will owe any deductible on the collision and comprehensive portions of your policy.
- You are personally liable for damages that exceed your liability coverage limits.
- You may be covered for damage only up to the value of your own personal car. That is, if you drive a $10,000 car but wreck a rental worth twice that, the difference is your responsibility.
- You may not be covered if you are renting a car for business use rather than personal or pleasure use.
- You may be personally liable after an accident in a rental car for administrative fees and loss of use while the car is being repaired.
Don't assume your credit card takes up the slack
You may have additional auto insurance coverage through your credit card, but it's important that you check your credit card information for specific details. Some cards only offer coverage if you rent your car from a particular agency. Some limit the days for which coverage is available. Some will only provide coverage for certain types and/or classes of cars.
With some credit cards, the coverage is not automatic. You must enroll in a program in order to get coverage. Some cards that advertise automatic rental insurance really only reimburse you for the deductible that you would have to pay under your regular insurance policy.
Still other credit card rental car benefits provide only collision and comprehensive coverage, leaving you exposed for personal injury or property damage to others if you don't have your own liability coverage to cover this.
Credit cards are secondary coverage; they typically pay after your personal auto insurance benefits and any coverage you bought at the rental car counter have been exhausted.
What rental-car companies offer
Rental car agencies typically offer coverage in two parts. First is a supplemental liability policy that protects against claims from anyone you hit or injure. In some states, the liability coverage is included in the price of the rental. If you don't carry liability insurance on a car of your own, you should ask whether it is included and buy it if needed.
The second kind of coverage is a loss damage waiver (LDW) that covers the rental car. LDW -- sometimes called a collision damage waiver (CDW) -- is not technically insurance; rather, it is a company's agreement not to hold the consumer liable for loss, including damage to the car, lost income from rentals while the car is repaired,
Some LDWs 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 LDW if a driver drinks alcohol or if a non-authorized driver operates the car.
You may be offered other types of insurance at the rental car counter, including coverage for your own injuries, theft of your personal goods, or accidental death.
Before you buy those additional coverages, check your other insurance policies. For example, if personal property has been stolen from your rental car, it may be covered under your homeowners or renters policy. Similarly, certain medical policies may cover costs of injuries not covered by your car insurance policy.