“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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