We have all been there, at the rental car counter. You are just off of the plane, ready to get as far away as you can from airport food, strangers, and public bathrooms. You can’t wait to go out and finally experience this vacation you have been planning for so long. The only thing between you and this new adventure is a signature or two and you are on your way.
Then the agent asks, “Would you like to purchase the insurance for your rental car?” Do you play it safe and pay for the overpriced insurance they offer or take the gamble? You can’t remember if your auto insurance covers rental cars or not. Plus you are in a new place with unfamiliar roads and fast, furious drivers. What is the smart thing to do?
Do you need it?
This is the burning question. In truth, you probably won’t need it. But the best way to be prepared for any situation is to make sure that you have the insurance you need to give you peace of mind.
So do you get the insurance offered at the rental counter? It is important to keep in mind that the person working at the counter is not a licensed insurance agent and likely does not really know much about the insurance laws. They may try to tell you that your auto policy will not cover for rental cars (they usually do), that you are required to buy their coverage (you aren’t), or you will be held personally liable (most likely not true).
This Coverage Is Incredibly Expensive
The fact is that buying rental insurance through the rental company can be very expensive. They usually charge on a daily basis and they will try to push additional coverages onto you that you don’t need. At the end of the day, you will be paying 10 to 20 times what you pay for your normal auto insurance policy.
So who needs to buy the rental car coverage? Well, here's who doesn't. If you have insurance for your own cars, including collision and comprehensive coverages, you don't need the rental car insurance - provided you are not renting the vehicle for business purposes.
If you're on vacation, no problem. Just say no. If you're on vacation but planning to do some business, you're probably OK. But you should talk to your auto insurance agent if you mix business and pleasure on the trips where you plan to rent a car.
* Note. One thing to keep in mind: Your collision and comprehensive coverages on your personal auto insurance policy have deductibles (the amount you must pay before the insurance kicks in). Those deductibles apply to damage to rental cars as well.
What if You Don't Carry Collision Coverage?
Many people don’t carry collision or comprehensive coverage on their vehicles, especially if they are over ten years old. It is important to remember that if you don’t have collision or comprehensive then you will not have any coverage for your rental car. In that case it would be wise to get the insurance that the rental company provides.
You will be purchasing a Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW). These will cover any loss or damage to the rental car just like your collision and comprehensive covers your regular car. There are many options to consider on each of these waivers, such as first dollar coverage or a deductible. The deductible will work just like it does on your regular auto policy. The first dollar coverage is a little more expensive and have limits to the coverage.
What if You Damage another Vehicle When You're Renting a Car?
What about damage or injuries you cause to other vehicles and people while you're driving the rental car? If your personal auto policy includes liability insurance (most states require some level of such coverage), your policy will pay for any damage or injuries you cause to other cars or people - up to the limits of the policy, of course.
If you don’t have liability insurance, most states require the rental car company to provide limited liability to you at no charge. Will it be enough to cover you if you are in an accident? Probably not, in which case you would be responsible for any amount that exceeds their limits.
If you have any concerns about whether you need to buy the coverages offered by rental car companies, you should talk to your
auto insurance agent. Rental car insurance can double your daily rate. That's a lot to pay for something you don't need.