Does Auto Insurance Cover Rental Cars?

Whether your vehicle is in the shop or you’re planning a vacation or business trip, renting a car can give you the added convenience of having your own transportation. When completing a rental car agreement, you will be prompted on whether you want to purchase rental car insurance. Before you answer, it’s important to understand whether you’re already covered and what (if any) additional coverage you may need.

Do You Have to Have Rental Car Insurance?

If you already have an auto insurance policy, you may not need additional insurance for rental cars. Standard auto insurance policies typically provide the same or similar coverage when you’re driving a rental car as when you’re behind the wheel of your own vehicle.

In addition, the rental car company usually already provides you with the state’s minimum liability coverage. However, keep in mind that this may not be sufficient. For example, if you have an accident and someone is seriously injured or killed, the damages may far exceed the coverage, leaving you personally liable for the balance.  

If you’re renting a luxury or sports vehicle, you may also want to consider whether you need additional coverage. Your auto insurance typically covers a rental car if it’s damaged, stolen, or totaled — as long as the vehicle is of similar value. If you normally drive a Honda and have decided to rent a Porsche, you may need additional coverage.

In addition, your standard auto policy typically does not cover vehicles you drive for business purposes. If you are renting a car on a business trip, you may need additional insurance. Your policy also may not cover rental cars outside the United States and Canada, so it’s important to check before renting a vehicle in a foreign country.

How Does Your Standard Car Insurance Policy Cover Rental Cars?

In many cases, the coverage you have under your personal auto insurance policy extends to rental cars. This includes any collision, comprehensive, and liability coverage you have. Typically, if you’re in an accident or the vehicle is stolen, vandalized, or damaged by any other covered peril, you’re protected up to your policy limits. Your liability coverage also protects you if you injure someone or cause property damage while driving your rental car.

If you need to make a claim following an incident with a rental car, your standard deductible still applies. You need to pay your full deductible amount before the insurance company pays its share. For example, assume you were in a single-car accident that caused $25,000 in damage to the rental vehicle. If you have a $1,000 deductible, you need to pay that amount first, then the insurance company pays the remaining $24,000 up to your coverage maximum.

When Does Standard Car Insurance Not Cover Rentals?

Your standard car insurance policy typically covers rentals with the same coverage you have on your personal vehicle. For example, if your standard policy only has liability coverage and does not include collision or comprehensive coverage, then your rental vehicle is only covered for liability, too.

While liability coverage helps pay if you injure another party or cause property damage, it does not cover damage to your vehicle or your rental vehicle. In this case, if the rental vehicle is damaged, stolen, or totaled, you’re responsible for the cost. Policy maximums also apply. If you have $50,000 in collision coverage and you total a $100,000 rental car, you are responsible for the difference. The same is true for your maximum liability coverage.

How Does Extra Car Insurance for Rentals Work?

If you’re concerned that your current insurance coverage may not be sufficient, you can purchase several different types of additional insurance from the rental company. Here’s a look at the coverage that is automatically provided to renters and some of the additional coverage you can buy.

What Insurance Coverage Is Automatically Included When You Rent a Car?

When you rent a vehicle, the rental company typically provides you with the state’s minimum liability coverage. This amount varies depending on the state where you rent your vehicle.

If you have your own insurance policy with liability coverage and an incident occurs, you are typically required to use your own policy, rather than the rental company’s policy. However, if you do not have liability insurance or your coverage is lower than the state’s minimum, this coverage can provide additional protection. In some cases, you may decide that the minimum coverage is not enough and want to purchase additional liability insurance. 

Keep in mind that rental company policies may vary. If you are relying on their liability coverage, be sure to check that it’s included before you drive off the lot.

What Additional Rental Car Insurance Can You Get?

There are several options for purchasing additional rental car insurance. This includes:

• Comprehensive and collision insurance: This add-on covers damage to the rental vehicle from an accident or another covered peril. If you have comprehensive and collision coverage on your standard auto insurance policy, there’s a good chance it extends to your rental vehicle. In this case, you do not need additional coverage. Before declining this coverage, confirm you’re covered under your standard insurance and that the coverage you have is sufficient for the value of the vehicle you’re renting.
• Personal accident insurance: This add-on covers your medical costs if you’re in an accident. If you already have personal injury protection (PIP) or medical payments coverage through your auto insurance policy, you can safely decline this coverage. You may also feel comfortable declining if you have sufficient health insurance to cover any injuries you may sustain.
• Personal effects coverage: This add-on reimburses you if your personal items are stolen from your rental vehicle. However, since homeowners and renters insurance offer the same coverage, you may be able to safely decline this coverage if you already have either of these policies.
• Liability insurance supplement: If your insurance coverage and the minimum coverage offered by the rental company are not enough, you can add extra coverage. This may be advantageous since you may be driving more than usual in an unfamiliar vehicle and on unfamiliar roads. If you have 25/50/25 coverage or more ($25,000 bodily liability per person, $50,000 bodily liability per accident, $25,000 property liability) on your standard insurance policy, then you may consider declining this coverage.

Waivers vs. Additional Coverage

Your rental company may also offer waivers, which are optional contracts you can purchase. These waivers do not provide additional insurance coverage, but they do limit your liability. For example, a collision damage waiver (CDW) — also called a loss-damage waiver (LDW) — states that the rental company waives its rights to go after you if the vehicle is damaged or (in some cases) stolen.

If you have comprehensive and collision coverage, a waiver may be redundant. However, if you do not have this coverage, waivers may be less expensive than purchasing rental car insurance.

It’s important to note, however, that it’s possible to void your waiver by engaging in risky behaviors, such as drunk driving or speeding. It may not apply if you were negligent and, for example, left the vehicle running outside a store while you ran in. Waivers may also exclude certain parts of the vehicle, such as the windshield and tires, as well as certain causes of damage.

Credit Card Rental Car Insurance

Many credit cards provide additional coverage when you use them to rent a vehicle. This coverage typically kicks in after your personal auto insurance policy, but it can still be a valuable backup. For example, it could help reimburse you for your insurance deductible, which may be $1,000 or more. Some cards also offer primary insurance, which pays out first, so you may be able to avoid making a claim on your auto insurance policy altogether.

Each card offers different coverage, so it’s important to reach out to the company and get the details before you rent your vehicle. Make sure you understand what’s included, what the coverage limits are, and if there are any exclusions. In many cases, you can call the number on the back of your card to get the information you need.

Should You Consider Car Rental Insurance?

While rental car insurance is sometimes redundant, it may make sense in some cases. For example, if you do not have your own insurance and your credit card does not offer coverage, then purchasing rental car insurance can help ensure you’re not stuck with a large bill after an accident. Whenever you’re planning to do a lot of driving, rent an expensive vehicle, or travel outside the U.S. and Canada, additional rental car coverage may be beneficial. And, if you’re traveling on business, you may also need to purchase additional coverage because your standard auto policy may not cover business usage.

How to Buy Rental Car Insurance

If you believe you need additional rental car insurance, contact your auto insurance company to see if you need to add it to your current policy, or reach out to your credit card company to see if it offers coverage. Otherwise, you can purchase coverage directly from the rental company when you complete your rental contract.