Yes, you need insurance to rent a car, but you can usually purchase coverage from the rental company if you don’t have your own. The agency’s coverage can help pay for any damage to the rental vehicle.
You may also need additional insurance to rent a car if your insurance policy does not include collision or comprehensive coverage. And you might need rental insurance if you’re renting a car in another country, as your U.S. auto insurance may not cover accidents in these situations.
When it comes to insurance for rental vehicles, you have a few options — primarily purchasing coverage from the agency or a travel insurance company.
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How Does Rental Car Insurance Work?
Rental car insurance comes with a lot of fine print, which can be a bit tedious to read through. Still, it’s important to note these critical details.
Insurance Minimums for Rental Cars
Most U.S. states require any vehicle on the road to carry a minimum level of insurance to cover damages the driver may cause to others. For example, in California, you must insure an auto for a minimum of:
- $15,000 for the death or injury of one person
- $30,000 for the injury or death of more than one person
- $5,000 in coverage for damage you cause to property
Most rental car agencies ensure their vehicles meet state insurance requirements. However, depending on the agency and the state where you’re renting the car, you may be asked to prove that you have a valid auto insurance policy. This policy must include liability insurance, which covers damages you cause others in the rental car.
What Are the Different Varieties of Rental Car Insurance?
Rental agencies sell coverages that are not actual car insurance but can help lower or eliminate expenses that could result from an accident. Insurance offerings vary among agencies but may include:
- Loss or Collision Damage Waiver (LDW/CDW): Rental car agency covers any rental car damages, theft, or losses
- Liability Insurance (SLI): Helps cover injuries or damages you cause others if you’re responsible for an accident
- Personal Accident Coverage: Covers your and your passengers’ medical, dental, and death expenses up to a limit
- Personal Effects Coverage: Helps replace personal items (such as luggage) that are damaged, lost, or stolen while in the vehicle
- Roadside Service: Defrays the costs involved with roadside assistance
These coverage policies are sold per rental, per day. For example, you might pay $30 per day for a CDW per day, adding an extra $300 (plus tax) to a 10-day rental.
Who Provides Rental Car Insurance?
You can buy rental insurance or coverage directly from the car rental agency, which adds the cost for each insurance type to your rental agreement.
You can also purchase a standalone auto rental policy or a policy within a larger insurance package through a travel insurance company. These policies typically help cover car damage and theft, damage to or theft of your belongings, and roadside assistance up to a set dollar amount. Auto rental coverage may cost less through travel insurance than through a rental agency, but read the policy’s coverage details to ensure you get the right plan.
Some credit cards may also offer primary or secondary auto coverage. If the policy is secondary, your own insurance policy, if you have one, must pay out first. If it’s a primary policy, the card’s coverage pays first. However, many credit cards have exclusions, including specific vehicles or dollar limits.
Does Your Personal Car Insurance Extend to Rentals?
Yes, your car insurance may cover a rental car, though you should always call your insurer first to make sure you understand if or how you’re covered. Typically, your auto insurance should provide the following coverages if you have full coverage:
- Damages or injuries you cause to others or their property: Your liability insurance helps cover claims against you if you’re at fault in an accident.
- Damage to or theft of the rental vehicle: Your collision insurance may cover rental car damage, while comprehensive insurance covers other damage scenarios, such as flooding.
However, remember that any claim made—even for rental car damage—could count against you when renewing your policy. Your insurance prices could go up as a result.
Are There Situations Where You May Need Both?
You may wish to buy rental car insurance to help avoid claims against your personal auto policy if you damage the rental vehicle. Any claims made could increase your rates. Ensure the auto rental agency’s insurance acts as primary insurance in this case.
You could also buy rental insurance if you want to skip paying a deductible. In short, rental insurance could provide extra peace of mind.
You’ll need to buy rental insurance if you do not have collision or comprehensive insurance on your policy or a credit card with sufficient coverage. If you’re in an accident and uninsured for damages, you could be on the hook for the full cost of the rental car’s repair or replacement.
Price Breakdown: Standard vs. Rental Car Insurance
If you compare auto coverage prices for a larger SUV, you’ll notice a significant difference
immediately.
Collision and Comprehensive Personal Auto Insurance | Rental Damage WaiverRental Agency | |
|---|---|---|
Per Day | $2 | $30 |
Per Month | $69 | $900 |
Per Year | $831 | $10,950 |
Buying insurance through a rental car company costs far more for several reasons. The agency’s damage waiver cost is the same, no matter your age, risk of accident, or destination. The insurance company does not do a deep dive into a driver’s history or profile, so it needs to charge a higher fee to everyone.
Rental cars are also at higher risk of an accident during your rental period since they are driven by new drivers in new destinations, possibly for great distances.
In contrast, insurers design an auto insurance policy to cover the insured’s specific vehicle over the year in various situations. The policy is based on underwriting, which considers the driver’s age, location, and driving and claims history, among other factors.
Should You Get Rental Car Insurance?
In a few scenarios, rental car insurance could be ideal for you:
- You do not have auto insurance. If you do not have a personal policy, the agency’s coverage can help protect your finances if you cause an accident.
- You do not have collision or comprehensive. Rental car insurance offers financial protection.
- You want to avoid potential claims. Perhaps due to past claims, you’re already paying higher premiums. Remember that claims can still result if you cause third-party damages to people or property.
- You have a very high deductible. In exchange for lower premiums, some people have $1,000 or $2,000 deductibles. If you damage the rental car, you’ll have to pay that deductible before your insurance begins paying for the car’s repairs.
- Your insurance does not cover rental cars. Your insurance may not provide coverage while you’re driving in another country, or it may just not cover rental cars. It could also restrict the rental period, rental vehicle type, or value.
Pros
- Potentially no deductible: If you rely on your personal auto policy, you’ll have to pay your deductible before your insurer to cover any damage to the vehicle.
- Coverage options: Depending on the rental agency or travel insurer, you can choose coverage for the rental vehicle, your belongings, roadside assistance, or extra liability coverage.
- Easier management: If the car is damaged or stolen, you’ll contact the agency directly instead of dealing with the hassle of making a claim through your credit card or personal insurance.
Cons
- Cost: Purchasing separate rental car insurance costs far more than relying on your auto policy. In a worst-case scenario, coverage costs can equal or surpass your rental fees.
- Claims may still go on your record: Car agency rental coverage may not cover claims if you damage someone else’s car, cause injuries, or get a speeding ticket.
- Exclusions: Most auto rental policies have dozens of fine-print exclusions that limit claim coverage, such as taking a vehicle onto a gravel road.
- Complexity: If you have to juggle rental car coverage, personal insurance, and credit card coverage, you may face a thicket of paperwork to decide which policy pays claims.
Putting It All Together
When deciding how to insure your credit card, it’s challenging to decide between using your own auto policy, purchasing auto rental or travel insurance, and relying on a credit card.
To choose, consider your risk tolerance for the unexpected and the safety of driving the rental to its destination. For example, if you’re putting thousands of miles on the odometer, your chances of an incident or accident increase. Extra coverage may provide more peace of mind.
But you cannot plan for everything. Claims can still result, and fine print can be overlooked. Get help, if necessary, from an insurance agent or the rental agency. And drive safely.