“Would you like to add insurance to your rental?”
“Ummm … ?”
That’s me, every single time I rent a car. I’ve heard competing rumors: that car rental insurance is a great idea, that you don’t need it, that somehow your credit card covers it.
So finally, I’ve decided to get an answer — do you need rental car insurance?
What are the different types of rental car insurance?
When you get to the counter, you might be overwhelmed by the different types of insurance available.
Here are four kinds of insurance a rental company might offer you, followed by what they cover:
- Loss or collision damage waiver (LDW or CDW): Loss or damage to the rental car
- Liability: Potential lawsuits from damage to people or property
- Personal accident insurance: Medical bills
- Personal effects: Loss of any items inside the car
Add all these up, and you could be looking at an additional $40 per day — sometimes more than the cost of the rental car.
And the thing is, your current insurance policies might already cover you in many of these situations.
For example, your health insurance or car insurance policy will likely cover any medical costs due to an accident, and your homeowners or renters insurance could cover losses to your personal effects.
In other words, you can probably skip personal accident and personal effects insurance. But CDW and liability are another story.
Do you need to purchase the damage waiver for rental cars?
The CDW is where things get more complicated. As its name suggests, it’s not technically insurance; it’s a waiver that helps cover repairs to the car if it’s damaged.
But no matter — the important question is: Do you need it?
If you have comprehensive car insurance, probably not. That’s because your policy already provides coverage when it comes to loss, damage, or liability.
Or, as one expert told U.S. News: “For people who already have collision coverage on the rental car, getting the rental car insurance policy is a waste of money.”
If you have an old car and don’t carry collision, or if you’re not a car owner, you’ll have to look to a credit card for that coverage — more on that below.
And whatever type of car insurance you have, it might fall short in certain situations. For example, here are two car rental charges that insurance companies typically wouldn’t cover:
- Loss of use: How much the car rental car company loses while the car is out for repairs
- Diminished value: Loss in resale value after the car’s been in an accident
These potential fees are why two experts told The Chicago Tribune it’s worth paying for the CDW.
Do credit cards provide rental car insurance?
Before accepting or declining the CDW, however, you should see what type of coverage your credit card offers. Some even cover loss-of-use fees.
The majority of credit cards act as secondary insurance, which means they’re a backup to your primary car insurance — and that you’ll have to file a claim if something happens.
More helpful are the handful of credit cards that offer primary car rental insurance; since their coverage applies first, you won’t have to file a claim with your auto insurer.
Note that your credit card’s insurance will only apply if you decline the CDW. Credit cards also have specific restrictions — like coverage doesn’t apply if you’re traveling for business, in certain countries, or renting a truck, luxury, or off-road vehicle.
And, if you don’t own a car, it’s vital to know that almost no credit cards include liability coverage.
So if you don’t have personal car insurance — and therefore no liability insurance — you should consider purchasing it from the rental agency.
Although every rental agency must include the state-minimum liability coverage, it probably wouldn’t be enough if you were in a serious accident. Supplemental liability insurance costs approximately $10.95 per day, according to Consumer Affairs.
Do you need rental car insurance?
Before renting a car, you should contact both your car insurance and credit card companies. Figure out exactly what’s covered and what the restrictions are.
The decision is, of course, up to you — but overall, here are several situations when you should opt for the CDW:
- You don’t have comprehensive car insurance or a credit card that offers coverage.
- You’re traveling for business.
- You’re nervous about fees for loss of use or diminished value.
- You’re renting a type of car or are in a country that your credit card doesn’t cover.
- You don’t want an accident to increase the cost of your car insurance premium.
In my case, I pay for rentals with the Chase Sapphire Reserve, which offers primary car rental insurance and even covers loss-of-use fees, so I won’t purchase the CDW in the future. But, since I don’t have car insurance right now, I will purchase liability coverage.
After all, it’s better to be safe than sorry.
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.97%1||Undergrad & Graduate|
|2.56% – 7.30%3||Undergrad & Graduate|
|2.68% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.00% – 9.74%6||Undergrad & Graduate|