If you have ever rented a car, you will be faced with a dilemma: do you buy the car insurance offered by the rental car agency? After investigating this issue myself, I can understand why the uncertainty may create doubt, which may lead you to buy extra coverage unnecessarily.
For cases where you are renting in the U.S and you have a full coverage insurance policy with a carrier (liability and collision/comprehensive), your liability for damage to the car and others will be the same as if you were driving your own car. When a claim needs to be made, you will need to file it with your insurance carrier and also cover any deductibles that are built into your policy.
Recap: Liability insurance covers damages you cause (or are determined to be responsible for) to other people or property. Collision/Comprehensive insurance covers damages only to the vehicle (the loss limit is the value of the vehicle).
No Collision Coverage
On my own personal car policy, I dropped the collision/comprehensive coverage and self insured. Therefore, there isn’t any coverage to use in the case where there are damages to the vehicle that are not covered by a third party policy. I would be on the hook. However, if you use a Visa/Mastercard to pay for the rental (be sure to use it to pay for the entire bill), you may get a collision/comprehensive policy coverage.
The following cards include the coverage:
- All Visa Cards.
- MasterCard Gold and above, the standard card is not included.
- All AMEX Cards.
The coverage offered by the policy will typically include the following: damages up to the vehicles value, towing costs, and loss of use costs charged by the rental company.
Credit Card Bonus
Even if you use your own personal insurance to pay a claim, you can use the policy offered by your credit card to pay for deductibles. You will need to charge the rental bill on the credit card and file a separate claim.
Buying the LDW
Rental car companies offer their own set of coverages, they would need to at least for people who are licensed but don’t have any insurance. These policies are much more expensive than the equivalent daily rate for your own personal policies.
In the case of the collision/comprehensive policy, the best policy they offer is the Loss Damage Waiver (LDW). This is not insurance because there is no claim to file, when damage occurs you walk away and the coverage takes care of the damage. It is understandable why you might want to buy this coverage since it relieves you of the trouble of filing claims.
Some companies (Hertz, e.g.) offer small policies that only cover the deductible of a damage claim or small damages, up to a typical limit of $500 or $1000. These waivers have the same trait of the LDW, you walk away with no claims to file. Of course, any damage in excess of this amount would require a claim against your other coverage.
If you have a personal insurance policy in the U.S., it very likely isn’t going to be of any benefit when renting abroad. These policies only cover the U.S, including Puerto Rico/Virgin Islands and probably Canada.
If you are travelling abroad and want to rent a car, plan accordingly. Using a major credit card will still get you collision/comprehensive policy as above, subject to some country exclusions. Liability coverage won’t be included. Here are some links that talk about things to look out for: here and here.
- When you are on vacation, it doesn’t hurt to buy extra coverage if it gives you some piece of mind. After all, you are there to enjoy your vacation not worry about unforeseen costs.
- Credit cards policies may limit vehicle value to $50,000 or less. Don’t rent a fancy car. Also, there are limits on the number of rental days: for MC it’s 31 days, for Visa it’s 15 days U.S/30 days international.
- Credit card coverage will be available if you charge all the rental costs to the same card. Make sure the renter (the person signing the rental contract) and CC owner are the same person.
- It doesn’t hurt to call your credit card issuer first to verify coverage.
- Inspect your vehicle before you drive off! You don’t want to be surprised with any damages that you did not know about. The rental company should provide a sheet for you to document any existing damage.
- RickSteves has tips for international rentals and reader feedback.
- MasterCard insurance information page.
- Visa insurance information page.