Rental Car Insurance Explained

Coverage can come from your personal auto policy, the rental car counter or a third-party insurer.

If you’ve rented a car, you’ve probably been warned by salespeople at the counter about the possible consequences of walking away without buying their company’s rental car insurance. Put on the spot, you might not feel confident about exactly what coverage you already have. And that’s what rental companies are counting on — along with their commissions for selling you the coverage.

Note that rental car insurance isn’t the same as rental car reimbursement coverage, a common auto policy option that covers the cost of a car rental if your vehicle is being repaired as part of a claim.

The information below will help you understand whether you need rental car insurance and how to get it before you arrive at the rental counter.

Do you need insurance to rent a car?

You don’t need to have your own auto insurance policy to rent a car. However, rental agencies typically have minimal coverage on their vehicles, so if you get into an accident, you could be responsible for significant expenses.

Other options include buying additional insurance from the rental car company, using a credit card for coverage or getting a standalone policy through a third party.

Rental car insurance vs. your own auto insurance

Here are the typical insurance options from rental car companies, along with how to determine if you already have coverage within your own auto insurance policy.Nerdy tip: Coverage from your own policy applies when you are using a rental car for personal, nonbusiness purposes. The rules may be different for business use of a rental car. Check with your insurer or employer for details about coverage when using a rental car for business.

Crashes and car theft

At the counter: A loss-damage waiver or LDW, also called a collision damage waiver or CDW, gets you off the hook for damage to the rental vehicle or theft of the car. It’s technically not insurance but rather a waiver that says the rental car company won’t come after you.

Your policy: If you have collision and comprehensive coverage on your own policy, it generally will extend to a rental car as long as you’re renting within the U.S. or Canada. However, you will still be responsible for your deductible, and filing a claim on your auto insurance policy could raise your premium.

If you don’t have comprehensive and collision on your regular policy, or you’re renting in a location where this coverage isn’t in effect, you’d have to pay for the damage unless you buy the LDW.

Damage you do to others

At the counter: Supplemental liability protection will pay for damage you do to others’ vehicles or property. Typical limits range from $300,000 to $1 million. If you don’t have auto insurance (for example, if you don’t own a car), or if you’re traveling in a country where your own policy doesn’t offer coverage, you should buy this.

Your own policy: Your own liability insurance will typically cover you when you’re driving rental cars within the U.S. and Canada. If you have minimal liability coverage on your auto policy, you could buy the supplemental protection to boost your coverage.

Injuries to you

At the counter: Personal accident insurance covers medical costs for you and your passengers if you’re involved in an accident. This includes ambulance, medical care and death benefits.

Your own policy: If you have personal injury protection or medical payments coverage through your auto policy, you likely won’t need personal accident insurance as long as you’re renting in the U.S. or Canada. Your own health insurance may also cover you if you’re staying within the U.S. Overseas, you probably don’t need personal accident insurance if you have travel medical insurance.

Your stolen stuff

At the counter: Personal effects coverage pays for your belongings if they’re stolen from the rental car, up to a set dollar amount.

Your own policy: A homeowners or renters insurance policy will generally cover your possessions if they are stolen, even when traveling out of the country. To make a theft claim, you’ll typically need to file a police report, and your deductible amount will apply. As with auto insurance claims, filing a property claim could cause your rates to go up.

Using your credit card for rental car coverage

Credit cards often provide coverage for rental cars, assuming you used the card to pay for the rental and the rental is in your name. They can be a particularly useful option overseas in places where your personal auto insurance won’t cover you.

You’ll automatically have this coverage if it’s included with your credit card — no need to call or sign forms. But it’s usually secondary coverage, meaning your own auto insurance policy will pay out first if it’s available. NerdWallet assessed credit cards that offer good rental car insurance.

If you’re planning on credit card coverage, call your credit card issuer to confirm the details.

The bottom line: Do you need rental car insurance?

You may not need to buy the rental car company’s insurance if:

  • You’re traveling within the U.S. or Canada and your own auto policy provides sufficient coverage.
  • Your credit card offers rental car insurance.
  • You’ve bought standalone coverage through a separate company.

You may want to buy the rental car company’s insurance if:

  • You’re worried about having to pay a deductible or a higher rate on your auto insurance if you damage a rental car.
  • You don’t have your own car insurance or coverage through a credit card.
  • You’re traveling overseas where your personal auto policy won’t cover you.

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