How Does Rental Insurance Work?

Person with car insurance going to their rental car.

When you rent a car, you’ll be asked if you want to purchase insurance coverage for it. If you’re a frequent traveler, you’ve probably been through this several times. Do you actually need this coverage? How does rental car insurance work? Here’s what you need to know about rental car insurance.

What is Rental Car Insurance?

Rental car insurance is just what it sounds like—insurance that covers a rental car. Rental car insurance is usually offered at the counter when you finalize the paperwork. Rental car insurance can also be provided by your credit card company.

Most rental car insurance offered by the rental car company is redundant with coverage you may already have. In general, if you already carry full coverage on your personal car insurance policy, you don’t need to purchase additional rental car insurance. Check with your insurance provider for the specifics of your particular policy.

Most rental car insurance is redundant if you already carry full coverage.

Most rental car insurance is redundant if you already carry full coverage.

Rental car insurance is different from rental reimbursement coverage. Rental reimbursement coverage helps pay for a rental car while your personal car is being repaired.

When Do You Use Rental Car Insurance?

There are situations where purchasing additional rental car insurance may be necessary.

Renting Without Auto Insurance

While you don’t need to have your own insurance policy to rent a car, it’s a smart idea to purchase rental car insurance when you rent. Without it, you’ll be on the hook for expenses if you get into an accident with the rental car. Purchasing rental car insurance can protect you from liability if you injure someone, or if the rental car is damaged.

Renting In Other Countries

If you’re traveling to a foreign country and need to rent a car, your personal car insurance policy likely won’t cover you. Most auto insurance policies will only cover you in the United States, its territories or Canada. If your policy doesn’t cover you in the country you’re driving in, it’s a good idea to purchase coverage from the rental car company. Make sure any policy you purchase meets that country’s insurance requirements.

Renting with a Credit Card

Many credit cards offer rental car insurance as a benefit for cardholders. If you book a rental car with an eligible credit card, you’ll get insurance coverage for damage to the car. Check with your credit card issuer for details.

In most cases, the insurance offered by the credit card does not include liability or personal injury insurance. If you don’t already have these coverages on another policy, it’s a good idea to purchase them as well.

How to Buy Rental Car Insurance

When you go to the rental car counter to sign the documents, you’ll be offered coverage. The rental car agent at the counter will present you with coverage options, which you may choose to purchase or decline.

Remember, rental car insurance coverage is optional if you already carry full coverage on an insurance policy. Most full coverage policies extend to cover rental cars. If you don’t need additional rental car insurance, you may decline to purchase it.

What Type of Insurance is Included?

While the exact limits and exclusions vary between rental car companies, rental car insurance usually consists of the following coverages:

  • Liability coverage
  • Damage waiver
  • Personal accident coverage
  • Personal effects coverage

Liability coverage protects you if you injure someone or damage someone’s property while operating the rental car.

A damage waiver is technically not insurance, but is an agreement that you will not be responsible for any damage to the rental car. Theft of the vehicle is sometimes included but it could also be offered as a separate waiver.

Personal accident coverage helps pay for your medical expenses in the event of an accident. There may be additional medical expense coverage offered that increases the amount of coverage.

Personal effects coverage pays for the loss or damage of personal belongings while renting the car.

Insurance Upgrades: Should You Buy It?

Rental car coverage is largely redundant with most auto policies. However, some coverages could be considered upgrades if you don’t already have that coverage or the same amount of coverage on another policy.

For example, if your personal car insurance policy has lower limits than the ones offered by the rental car company, the additional rental car coverage would offer more protection. If you don’t have comprehensive and collision coverage on your personal car, the damage waiver on a rental car can be a good upgrade.

How Does the Deductible Work?

If you file a claim with your own insurance company, you may need to pay a deductible. A deductible is the amount you need to pay before your insurance will start paying for insurance claims. It’s your share of the cost in the event of a claim.

A damage or loss waiver from the rental car company does not carry a deductible. If you purchased the damage waiver, you won’t have to pay anything out of pocket in the event of an accident. However, if you file a claim through your own insurance company you will have to pay your deductible.

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