Rental car agencies have a menu of insurance policies they would like to sell you. While each policy could be of some benefit under the right circumstances, you should review each plan (its provisions, limitations, and exclusions) before making a purchase.
Keep in mind; you may not need to buy this additional car insurance if you already have auto insurance to cover your personal vehicle.
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. In addition, the comprehensive and collision coverages you have on your personal vehicle should remain in effect (with the same deductibles).
A review of your policy, and a quick call to your agent, should verify that your coverages will cover a rental car. Make sure to check this out before renting a vehicle since some auto policies don't extend to rental cars. See "7 gotchas of cheap car insurance" for more information on other restrictions cheap policies tend to have associated with them.
You may also 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.
Rental car agencies typically offer liability coverage in two parts - a supplemental liability policy protects against claims from others and a loss damage waiver (LDW) covers the rental car. LDW is not technically insurance; rather, it is a company's agreement not to hold the consumer liable for loss from all or part of any damage to merchandise.
Before you rent a vehicle, realize the damages you could be responsible for and how these are covered, or not, by both your own auto insurance policy and credit card or the car insurance the rental company is offering.
If you suffer a loss that is not covered under your auto policy, 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.
If you find your current auto policy doesn't cover rental cars, shop around for a policy that does. If you're not sure what coverages you want as part of your policy, read our article, "How Much Car Insurance Should You Buy?" for a listing of coverage types and definitions.