Do I need rental car insurance?

Understanding the auto insurance coverage you already have can help you determine whether you need to buy rental car insurance.

Before you get to the rental counter, look at your current auto insurance policy and credit cards to see if they offer rental car protection. This can help you avoid a mistake of either buying duplicate coverage — or not enough coverage.

Let’s take a closer look at what rental car insurance covers and some situations where it may make sense to buy this type of coverage.

What does rental car insurance cover?

Rental car insurance purchased from a rental car company can help reimburse you if your rental car is stolen or damaged in an accident. It can also help protect you if you injure another driver or cause property damage in an accident while driving a rental car.

Here are four common types of rental car insurance offered by rental car companies.

• Collision damage waiver — Sometimes called a loss damage waiver, this type of coverage isn’t technically an insurance product. It releases you from financial responsibility if the rental car is damaged or stolen.
• Supplemental liability insurance — The minimum coverage that rental companies are required by law to carry varies by state. And it often isn’t enough to protect your finances if you cause injuries or property damage in an accident. If you have an auto insurance policy with higher liability limits, you’ll likely be covered. But if you don’t have auto insurance or you have a policy with lower liability limits, supplemental liability insurance can help fill in the gap if you’re in an accident while driving a rental car.
• Personal accident insurance — This covers the medical bills of the driver and passengers for any injuries caused in an accident.
• Personal effects coverage — This can help cover the replacement of any items stolen from your rental car.

Do I need rental car insurance if I have auto insurance?

Not everyone who rents a vehicle needs to purchase rental car insurance. You may already have coverage through your current auto insurance policy.

The insurance you carry on your own vehicle generally carries over to car rentals, too. But keep in mind that your personal auto insurance may not be enough, depending on your policy.

For example, if you don’t have collision or comprehensive coverage on your own car, you won’t have it on your rental. This means you may not be covered if the rental car is damaged or stolen. You may also be on the hook for extra costs, including administrative fees, loss of use or towing charges. In this situation, paying for a loss damage waiver when you rent a car may make sense.

On the other hand, your health insurance, personal injury protection or medical payment coverage on your auto insurance policy — if you have either — may cover medical expenses (up to your coverage limit) caused in an accident. If this is this case, you may not need to buy personal accident insurance when you rent a car.

And if you have an auto insurance policy with liability limits above your state’s minimum requirement, you may not need to purchase supplemental liability insurance, either. But auto insurance requirements vary by state, so check your policy to see what’s covered.

Does my credit card cover car rental insurance?

Your credit card company may offer some car rental coverage, but it’s generally limited to theft or damage to your rental vehicle and may have other restrictions. For example, you may have to use your credit card to pay for the rental in order for coverage to kick in, or you may only be covered for up to 15 or 31 consecutive days.

The amount of coverage you get from your credit card also depends on whether the credit card issuer provides primary or secondary insurance. With primary coverage, the credit card company reimburses you for covered expenses — you likely won’t need to file a claim with your auto insurance company. Credit card coverage on a rental car is typically secondary — it kicks in after your auto insurance has paid out on a claim, up to your coverage limit.

When should I get rental car insurance?

Here are some scenarios where you might want to consider buying rental car insurance from a rental car company.

• You don’t have a homeowners or renters policy. Policies that protect homeowners and renters from theft typically cover property stolen from rental cars. But if you don’t have this type of insurance, you may want to consider adding personal effects coverage when you rent a car.
• You don’t have auto insurance, or your policy is limited. Buying collision damage waiver coverage may be a good idea if you have a high-deductible auto policy or have auto insurance that’s lacking comprehensive or collision coverage. If you have no auto insurance at all — or you have a policy with low liability limits — you might also consider buying supplemental liability coverage for added peace of mind.
• You’re traveling for business. Your current auto insurance policy may not cover you if the primary purpose of your trip is business. It’s a good idea to check with your insurance company ahead of any business travel to see what it may cover.
• You’re traveling abroad. Your auto insurance generally won’t cover car rentals outside of the U.S. (Though some policies may cover car rentals in Canada, depending on the insurance company.) And policies for credit cards that include rental car insurance can vary. If you plan to travel abroad, check with your auto insurance company and credit card issuer first to see if your rental vehicle would be covered.

What’s next?

Before renting a car, take the time to understand what your existing auto insurance or credit card may cover to avoid buying coverage you don’t need — or so you don’t fail to buy coverage you do need.

If you don’t have auto insurance, consider buying liability insurance and a loss damage waiver to help protect your wallet if you’re in an accident or your rental car is stolen.

Before you drive off the lot, read the car rental agreement to understand what coverage is provided with your rental and what coverage is optional. When in doubt, ask an associate from the rental car company to walk you through the fine print.