Rental Car Insurance, Explained

Rental car insurance may be unnecessary if you have car insurance. Read this rental insurance guide to find out when you should buy rental car insurance.
Written by Jacoba Bood
Reviewed by Shannon Martin
You may be wondering if the rental car insurance packages offered through your rental car dealer are worth it.
If you have a credit card or a
car insurance
policy, there is a good chance that you already have some rental car insurance coverage. Here’s what you should know about car rental insurance so you can decide whether it’s right for you.
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How much does rental car insurance cost?

Here is an average cost breakdown of the types of car insurance that might be offered through your rental car company.
  • Collision damage waiver: $10 - $30/day
  • Rental car liability coverage: $10 - $16/day
  • Personal accident insurance: $3 - $9/day
  • Personal effects coverage: $1 - $6/day
Remember that rental car insurance prices are pretty arbitrary, so it is often worth shopping around for a rental company with affordable insurance rates.

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How does rental car insurance work?

Rental car companies typically offer various protection levels, and most will push you to buy the highest level of protection offered: a collision damage waiver, or CDW.
CDW insurance is undeniably overpriced. So much so that the cost of purchasing rental car insurance can sometimes even top the rental rate. Since it is such a cash cow, rental companies are going to push it. This also means they might punish you by nit-picking even the slightest dings if you choose to opt-out.
Even then, the CDW often excludes damage to certain components like windshields or tires.
On the other hand, CDW insurance is typically the only insurance option for rental cars that covers the hidden costs associated with damage, including all of the following:
  • Loss of use, or the revenue lost to the rental car company when the car is in for repairs or rendered a loss
  • Potential towing charges
  • The diminished value, which describes the potential loss the company suffers for not being able to resell the vehicle if it is damaged
  • The administrative fees the rental car company will have to pay for making a claim
For example, your credit card company might cover the costs of repairs to the vehicle, as well as loss-of-use charges. Still, this coverage is often limited and will probably leave you on the hook for the administrative fees of making a claim and the diminished value of a totaled vehicle.
Most rental car companies also offer the choice to purchase limited-coverage insurance options, including:
  • Rental car liability coverage to cover damages caused to other people or objects
  • Personal accident insurance to cover the medical costs of an accident for you and your passengers
  • Personal effects coverage to protect you should certain types of personal belongings be stolen from the rental vehicle

Does my car insurance cover rental cars?

While every insurance company is different, most providers automatically cover your rental car under the following circumstances:
  • Vacation and pleasure use driving within the US, US territories, and Canada
  • Temporary substitute auto for 30 days or less
  • Occasional rental of smaller moving trucks like U-haul. Check with your provider to verify if collision coverage applies
Commercial and business use rentals are very rarely covered.
If this is the case, your car insurance will apply to your rental car the same as it applies to your personal vehicle. The amount of coverage you have on your rental car will depend on the
types of insurance
you have for your own vehicle.
For example, suppose you only have
basic liability coverage
. In that case, it will cover the costs of any medical or property damages sustained by the other party if you are found to be at fault in an accident, up to your policy limits. However, you would still be on the hook for damages to your own rental vehicle and medical expenses for anybody in your vehicle as a result of the accident.
collision insurance
comprehensive insurance
are a part of your personal auto policy, your rental will have more extensive protection.
Collision insurance will cover the costs of damages to your rental vehicle should you hit someone else’s car or another object. Comprehensive insurance will cover damage to your vehicle arising from sources other than a collision with another driver, like storms, vandalism, theft, or animals. The same comprehensive and collision deductible that is selected on your personal auto policy will apply to the rental car.
In most cases, you will not need to worry about the extra fees rental companies tack on—typically your claims agent will deny those charges and the rental company will settle the claim for just the amount needed to repair the vehicle. But we can not speak for every insurance company, so is always a good idea to contact your insurance provider about what they will and will not cover before you pass on rental car insurance.
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Best credit card for rental car insurance

Most standard credit cards will provide free rental collision coverage as long as you use the credit card to pay for the rental.
While this sounds like an easy solution, there are some major caveats to note here.
Most major card providers like Visa and Mastercard only offer secondary-level rental car insurance protection, which will only cover you up to a certain limit. They typically do not cover administrative costs or diminished value costs, and they often exclude certain types of vehicles like luxury vehicles, motorhomes, trucks, and motorcycles.
However, certain premium credit cards offer primary-level rental insurance protection. If you use any of these credit cards, you can feel much more confident about declining the rental car insurance options offered by your rental car company:
  • Amex Platinum and Reserve cards offer $50,000 to $75,000 in rental car insurance limits, with options to purchase premium rental car insurance as well.
  • Most Chase cards offer strong rental protection for things including theft and collision damage up to the cash value of most rental vehicles in the US and abroad.
  • Capital One cards generally provide secondary-coverage rental car insurance in your country of residence and primary coverage insurance outside your country of residence, with certain exceptions.

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Alternatives to rental car insurance

If you take out rental cars on a relatively frequent basis, you might want to consider some of the following alternate insurance options:

Non-owner car insurance

Some insurance providers offer car insurance policies designed for people who don’t own their own vehicles. If this is you,
non-owner car insurance
could be more affordable than purchasing rental car insurance every time you borrow a vehicle. However, this coverage only provides liability and medical coverage, not comprehensive or collision.

Temporary car insurance

Even if you already own a vehicle and have a car insurance policy, your provider might offer temporary supplemental insurance that will help cover your rental vehicle above and beyond your standard insurance.

Travel insurance

Certain types of travel insurance provide medical and personal effects coverage comparable to that offered through your rental car company, so if you have travel insurance, be sure to read over your policy to find out what is included.
Just keep in mind that these options probably won’t cut it if you plan to take out a long-term rental, travel internationally, or rent a vehicle for business purposes.

When you should get rental car insurance

Generally speaking, if your situation checks all of the boxes below, you can probably skip the coverage offered by your rental car provider.
  • You use a credit card that provides at least secondary rental car insurance coverage to pay for the rental.
  • You already have a suitable insurance policy on your personal vehicle.
  • You are renting within the US or Canada.
If all of the above doesn’t apply to you, your rental car insurance coverage is likely limited at best, and you might want to consider supplementing it with a rental car company’s policy.
If you do purchase a policy from your rental car company, try to get coverage that makes up for the gaps in your existing coverage that you already have through your personal car insurance and/or credit card.
While a collision damage waiver might be worthwhile if you have no alternate coverage options, a less expensive and comprehensive type of insurance will probably provide sufficient protection if you already have coverage through a credit card or personal car insurance.
Keep in mind that you might also be partially covered for rental car insurance expenses through your homeowners, renters, or health insurance policy as well.
Most business travelers will be covered by their company’s policies, but there are exceptions.

Where to get the cheapest rental car insurance

Knowing the ins and outs of car rental insurance will ensure that you don’t pay for redundant coverage and waste your money.
If you’re looking for
cheap car insurance
, whether it’s for a rental or your personal vehicle,
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