Is Rental Car Insurance a Waste of Money?

When you're renting a car, you'll likely be offered car rental insurance when you pick up your vehicle. But did you know you might already have the protection you need through your auto insurer or one of your credit cards?

If you already have coverage, you'd be wasting money buying the protection the rental company offers. In fact, it could cost a good chunk of change.

So before you opt into coverage when renting, make sure you find out if you're already covered. Here’s what you need to know to save on your rental car.

Do I need rental car insurance?

Rental car insurance provides important protection. Vehicles are expensive, and you don't want to be held responsible for damage or theft if something happens to your rental while you're driving it.

But while you want to make sure you have insurance, this doesn't necessarily mean you need to buy the coverage the rental car company offers. If you have your own car and auto insurance to go along with it, you're probably covered already for any losses you'd incur when driving the rental.

There's also a good chance your credit card provides rental car insurance, as this is a common cardholder perk. For example, there are a few Bank of America credit card benefits for rental car insurance.

The only way you can know if you need to buy a policy through the car rental provider is to check what coverage you have before you pick up your vehicle. Learn about the kinds of insurance coverage that the rental car company will try to sell you, and review your auto insurance policy and cardmember agreements to compare the protections you have versus the protections you'll need.

Rental car insurance options explained

There are many kinds of car rental insurance that provide coverage for different types of issues. If you're trying to figure out how to save money on rental car insurance, you'll want to know what type of loss each policy protects against.

The different kinds of car rental insurance you might need include:

• Liability coverage: If you hurt someone or damage someone else's vehicle, you could be sued and held liable for the losses you cause. Liability insurance would pay for costs associated with the losses you cause to others.
• Supplementary liability coverage: Liability insurance on primary policies may have coverage limitations, such as capping coverage at $25,000 in losses. Supplementary liability coverage would pay for costs over and above what your primary liability policy pays for. It’s common for credit card car rental insurance to provide this type of coverage.
• Personal accident insurance: If you’re involved in a collision and you or your passengers get hurt, this will provide for coverage of medical care costs and other associated losses. If the accident is fatal, this insurance could pay out a death benefit.
• Collision or loss damage waivers: If the rental car is stolen or damaged while you’re in control of the vehicle, this insurance will cover the costs of any resulting losses. In some cases, it not only pays for repair or replacement of the vehicle, but can also cover the lost business the rental car company experiences while the vehicle is unavailable.
• Personal effects coverage: If you leave valuables in the rental car and they’re stolen, lost, or damaged, this insurance would cover those losses.

How to save money on rental car insurance

The cost of all insurance coverage can really add up when you rent a car, so it's important to ask yourself, “Do I need rental car insurance?” If you don't, the best way to save money on renting a car is to decline any unnecessary coverage.

The key thing to remember is that you don't need redundant coverage: If your auto insurance policy or credit card already provides a specific type of protection, you don't have to buy the same kind from the rental insurer.

So, always find out what protections you already have before you pick up your rental — and if you have coverage, you can confidently decline the policy the rental insurer offers.

Explore coverage available to you

To see what kinds of coverage you have:

• Check with your auto insurer: Sign into your online account to review your coverages or call the insurer and ask. Be sure to find out from the insurer if the coverage is in effect outside of the United States if you’re renting a car in a foreign country. And check the policy limits as well as coverage exclusions. If you have low coverage limits, you may decide you need additional coverage so you don't face losses that your insurance won't pay for.
• Look at your credit cards: Your cardmember agreement or customer service for your card issuer can tell you what types of car rental insurance you have available to you as a cardholder. Be sure to ask about coverage limits, exclusions, and whether your coverage will pay if you’re abroad. You'll also want to find out if the insurance is primary or secondary. If it's secondary, it pays only after a primary policy is exhausted. This would mean you'd first have to make a claim with your own auto insurer, then turn to your card to pay for anything your insurance didn't cover.

Carefully compare the insurance coverage you have with what the rental insurer is providing to you.

For example, your auto insurance may cover losses from a collision that you cause — but may pay only for repairs and injuries you cause to others. It may not cover diminished value or the loss of the value of the rental car that results if the vehicle is in an accident. You could be on the hook for paying for these losses out of- pocket, so it might make sense to buy insurance from the rental car company that includes diminished value coverage.

Other factors to consider

You'll also want to consider the price of coverage from the rental provider and weigh that against potential expenses that could occur if you make an accident claim on your own auto insurance — including the cost of your deductible and the potential for rising premiums.

Finally, think about how involved you want to be in making a damage claim if something goes wrong. If you go through your insurer, it may be much more hassle than if you opted to buy coverage through the rental car company.

Credit cards that offer rental car coverage

While many credit cards offer car rental insurance coverage, the specifics of the protection available will vary by card. Here are a few of the best travel credit card options if you're looking for a card that can cover you when you rent a vehicle:

See more cards that offer rental car insurance.

When it’s a good idea to buy rental car insurance

While purchasing rental car insurance often doesn't make a lot of sense, there are times when you should. Consider buying a policy if:

• You're worried about your premiums rising on your personal insurance policy: If you have to make a claim through your insurer for an accident, you could face higher premium costs going forward. Buy the coverage from the rental company if you want to avoid this.
• You're renting a car for a long time: Often credit card car rental insurance policies provide coverage only for a limited time. If you're renting a car for a month or longer, you might not be covered.
• You don't have coverage, or your coverage is insufficient: If you don't have coverage through your auto insurer or credit card company, or if your coverage limits are pretty low, make sure to get a policy from the rental car company so you aren't left with out-of-pocket losses should something go wrong. Pay special attention to coverage limitations if you're renting a car abroad, as your auto insurer or credit card company may not cover you once you've left the country.

Common questions about purchasing rental car insurance

How much does rental car insurance cost?

According to Policygenius, a full-coverage rental insurance policy will typically run around $33 to $47 for each day you have the vehicle.

Can I rent a car if I don’t have auto insurance?

There’s no requirement that you have auto insurance to rent a vehicle. But while most rental car companies don't require proof of insurance, you put personal assets at risk if you don’t have coverage either through your credit card company or the car rental agency.

What happens if you damage a rental car?

If you damage a rental vehicle, you’re responsible for covering any resulting costs. This can include loss-of-use costs if the car cannot be rented for a period of time, as well as diminished value if the damage affected the resale value of the vehicle. If you don't have coverage, you may have to pay for the damages out of pocket.

Does my full coverage insurance cover a rental car?

Your auto insurance should provide coverage for many losses that could occur when driving a rental car, including any property damage and injuries you cause. However, your car insurance may not provide coverage for certain types of loss, such as damage to your personal property or the car rental company's loss of use if something happens to the vehicle.

Check with your auto insurer to find out what coverage you have and what exclusions apply. And be sure to see if you're covered at all when abroad if you're traveling outside of the U.S., as many insurers limit coverage to losses that happen in the States.

Research insurance options to avoid wasting money on rental car insurance

As you can see, there's not an easy answer to the question of whether you need rental car insurance. Since your coverage needs depend on what protection your auto insurance and credit card company provide, always check your cardmember agreement and auto policy before renting a car. This will help you make an informed choice about whether to opt for coverage through the rental car company.

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Author Details

Christy Rakoczy Christy Rakoczy has a Juris Doctorate from UCLA Law School with a focus in Business Law, and a Certificate in Business Marketing with an English Degree from The University of Rochester. As a full-time personal finance writer, she writes about all things money-related but her special areas of focus are credit cards, personal loans, student loans, mortgages, smart debt payoff strategies, and retirement and Social Security. Her work has been featured by USA Today, MSN Money, CNN Money and more, and you can learn more at her LinkedIn profile.

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