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How does rental car insurance work?

At this point, you’re waiting in line at a Hertz, Enterprise, or Alamo about to rent a vehicle for the trip you’re currently on. While thinking about what kind of rental car you’d like to rent, you start to wonder whether the rental is covered by car insurance if something should happen.

Rental car insurance has a multitude of coverage policies from several different insurers as options. The policies cover damage to the rental car in the event of a collision, injuries to yourself and others, and if anything goes missing.

It would seem to be a no-brainer to get rental car insurance if your own car insurance doesn’t cover rentals. It also depends on where you’ve traveled and the amount of time the vehicle will be in your possession. And, there’s also plenty of terms and conditions for rental car insurance to be valid. It’s important to know how rental car insurance works, the types of insurance coverage, and whether or not the additional purchase is worth it.

How does rental car insurance work?

Your rental car coverage can come from three possible methods depending on the policy. The main goal is to protect people when driving a rental car.

A couple of places rental car insurance can come from are:

  • Personal insurance policy. Your own car insurance may cover rentals. Based on your policy, you would be able to get the same comprehensive or collision coverage just as you would with your personal vehicle. An employer’s car insurance policy would cover you the same way if you were using the vehicle for business purposes.
  • Credit card company. Credit card companies will often cover their client’s rental car insurance if said card is used as a method of payment. This coverage is valid for short-term rentals as a secondary form of car insurance. If you’re traveling outside the United States and need a rental car, then there may be some countries where this option of rental car insurance isn’t available.
  • Rental car company’s policy. Upon checking out your rental car at the counter, they’ll offer you their own company rental car insurance. The coverage options can be bought separately or together as a package. These types of coverage are the best option if your auto insurance policy isn’t applicable. Prolonged and/or abroad business trips are the best circumstances to purchase it.
  • Rental company’s standalone policy. Suppose you choose to opt-out of the rental car insurance offered by the company. In that case, you have the option to accept standalone providers in the United States like Allianz, Insure My Rental Car, and Bonzah. Standalone policies are convenient because they can be purchased ahead of time and can cover up to $10,000 in rental car damage.

What kind of insurance policies do rental car company’s offer?

There are several types of coverage plans that the rental car company can offer you.

Here are types of policies available:

  • Rental car liability insurance. This kind of liability car insurance covers damage in collisions and accidents in a similar manner to collision car insurance. The vehicle you hit, the other driver, and their property is covered by rental car liability. Your rental car is not covered if the accident was your fault. Also sometimes called “liability insurance.”
  • Collision damage waiver. Also known as a loss damage waiver, this policy covers you if you cause damage to the rental car. It works similarly to collision coverage. However, some collision damage waivers are exempt from natural disasters causing vehicle damage. Deductibles may also not apply.
  • Personal accident insurance. In regular cases, medical costs for anyone are covered by personal injury protection. Personal accident car insurance does the same for anyone injured in your rental car during an accident.
  • Personal effects coverage. Personal items stolen from your rental car or lost during a vehicle theft are covered by personal effects coverage. Homeowners and renter’s insurance work in a similar fashion. There may be some items that are excluded from the coverage.

When would getting rental car insurance be the best option?

Purchasing coverage directly from the company offers a couple of direct benefits. If you were to walk into a rental car office with no car insurance, then you’d purchase insurance directly from them with a credit or debit card. Rental car companies will also accept cash. At the same time, you’d pay fewer deductibles than you would if you had rental car or health insurance.

Rental car companies often include costs that normal car insurance will not cover, such as administrative or tow truck fees in a collision. When traveling out of the country, it always helps to buy the rental car insurance they offer since your personal policy may be exclusive to the United States. Lastly, if your trip is especially lengthy, then your own coverage is limited. If the vehicle will be in your possession for more than two weeks, then it’s best to take the rental car insurance being offered.

Can I Use My Car Insurance Policy Instead?

Your personal car insurance policy may already cover you in cases of rental cars. At that point, you may opt to use your policy over rental car insurance offered at the counter. For starters, using your own car insurance will save you more than car rental insurance-assuming that they will cover a car rental. You’ll also save trouble by working with a company you’re familiar with, especially if you have a reliable auto insurer. You’ll save time when it comes to the paperwork or lack thereof.

Getting the rental car company’s car insurance may be wise (and mandatory) when your personal auto insurance doesn’t provide coverage against rental car accidents. Liability car insurance isn’t enough to cover a vehicle that you are renting. As previously mentioned, your personal policies may not apply when traveling overseas. Buying car insurance from rental car companies is best when abroad. Using your personal policies normally requires filing a claim. Approving the claim for a vehicle you don’t own can lead to technical issues and is often not a smooth process.

Will My Credit Card Cover My Rental Car as a form of Insurance Coverage?

Car Rental with your credit card may result in the rental vehicle being covered as a benefit from your card company. This is something that varies by the card company. It’s common that credit card coverage includes theft and towing. It typically lacks in personal liability and medical coverage in the event of a rental car collision. Collision damage can be capped at anywhere between $25,000 and $50,000.

Most importantly, your credit card is best used as a method of coverage during short rental periods. If your car rental is longer than two weeks, then you’ll find your credit card may not be applicable. There are also several exceptions when it comes to what the card company will cover. Certain credit cards may not cover luxury, exotic, or SUV cars. All major credit cards like American Express, Visa, and Discover offer coverage of rental cars. Mastercard rarely offers any. At the same time, there’s a couple of countries where credit cards don’t qualify - Italy, Ireland, Israel, Jamaica, and Australia, to name a few.

What other personal coverage can I use for my rental car?

If your rental car is damaged, then there are cases your personal car insurance will cover you. We previously mentioned credit card benefits, but what about insurance policies? Aside from your auto coverage, you have your health and homeowners/renter’s insurance that can cover a damaged rental car. Having health insurance covers the medical costs for yourself and anyone else in your rental car.

Personal accident car insurance can cover you in similar circumstances if you don’t have health insurance. Homeowners and renter insurance ensure all your belongings should they be stolen or damaged in your car rental. Travel insurance purchased on a trip usually covers incidents involving rental cars. Your own travel insurance may be primary or secondary. Primary insurance is the policy that will kick in first. Once the claim is paid, then the remaining amount will be paid by the secondary insurance.

How much does Rental Car Insurance cost?

Each insurance policy that the rental car company offers varies on the type of vehicle and location. Rental car liability insurance can cost up to $16 a day, while a collision damage waiver can go up to $30. Personal accident insurance is significantly lower, with a max daily cost of $9. Personal effects coverage can go up to a daily rate of $6. Getting rental car insurance can double your bill. An economy rental vehicle will cost an average of $45 a day.

Coupled with the collision damage waiver and liability, you’d pay almost or just the same for your coverage as you would for the rental car alone. If not, then slightly less. The daily cost for an insured rental car would be an average of $80.

What do rental cars typically cost with added car insurance?

Assuming that you have the damage waiver, personal effects, and liability coverage from the rental car company, your total cost depends on where you obtained the vehicle. You can easily compute your total on a calculator. Some examples are:

  • Hertz. An economy rental car at Hertz can cost up to $46 a day. Added collision damage waiver, personal effect, and liability add up to $36 daily. Together you’d be looking at $82 daily total.
  • Enterprise. With an economy car at $44 and the three insurance policies at $33, you’d be paying $77 daily.
  • Budget. Budget offers economy rentals with a daily average of $42. Damage can be waived at $17, personal effects at $6, and liability would be $14. The daily sum of that rental would be around $79.

What other auto coverage options can I buy while renting a car?

There are some other coverage options if you don’t have your own insurance, are unable to use your credit card, or just declined the coverage plans the rental company offers.

Non-owner car insurance is available for purchase to drivers who don’t own a vehicle and frequently rent. This coverage provides the minimum requirement for each state for an annual cost between $250 and $500. Non-owner car insurance is also more affordable than what is offered at the rental counters.

As your rental is temporary, so can your insurance be with temporary car insurance. Your insurance company may offer policies that cover you for your rental time. Again, much more affordable than accepting rental insurance. Travel insurance can also cover you medically and personally in a collision, as previously mentioned.

When would I not have to get car rental insurance?

There are times where it does help to have car insurance and liability coverage of your own. As stated before, you shouldn’t buy rental car insurance if you have auto insurance or a credit card that adequately covers your car rental. It helps to check your life insurance, credit card benefits, and homeowner’s insurance before buying insurance from a renter.

You should also ask yourself, “What is the purpose of my visit? Business or pleasure?” Car insurance, especially your own, only provides coverage for vehicles on personal travels. If you’re on a business trip, then your employer may cover you under their insurance policy. In that case, buying rental insurance seems redundant.

Rental car insurance and how much you’ll have to pay for it depends on the vehicle you’re renting, where you’re renting it, how long you’re renting it, and what kind of vehicle and insurance you have.

It’s important to note that speeding, intoxicated driving, and any driver that isn’t you will not be covered by rental insurance. It pretty much works the same as auto insurance-be a safe driver, take care of the vehicle and research what the best policy would be for you. Your insurance agent should also be able to help you. Have any more questions about this topic, read about Can I Drive Someone Else’s Car Without Insurance?