Understanding Rental Car Insurance

Sometimes you need a break from the daily grind. So you hop on a plane to paradise where all your worries set sail with the wind. There’s just one small problem—you need a way to travel around. Thankfully, you can rent a car, but what about hurricanes, car thieves, and other drivers? Thankfully, you can get rental car insurance, too.

When you approach the rental car counter, the clerk will offer you rental car insurance. Before you waste any cash buying coverage, here is what you need to know:

You may already have coverage

The rental car clerk will present you with the choice to buy a Loss and Damage Waiver, which is a type of insurance covering loss and damage to your rental car. Without this coverage, you assume costs if the car is stolen, totaled, or damaged. If you’re already a car owner, your primary auto insurance policy may include this type of collision insurance for your rental car.

Let’s assume you have collision insurance through your existing auto policy but your deductible is high. Your credit card company may offer supplemental, or secondary, protection. There are a couple of caveats, though.

  • First, to take advantage of credit card coverage. You must pay your rental card bill with the card offering the coverage. For example, your American Express card may offer insurance for your rental car, yet you pay your rental car bill with your Discover card. In this scenario, you are not covered.
  • Also, your coverage may be restricted. Your credit card rental insurance policy may not cover luxury cars or cars rented in Australia, for instance. Double check that your credit card policy covers your travel needs. With credit card coverage, you usually get collision, damage and theft only—but nothing more. In the case of injury or damage to property to yourself or someone else, you will need additional protection, such as medical coverage or liability insurance, which is insurance that covers you if you injure someone else or damage their property. So check your personal auto insurance policy and credit card coverage or call your insurance agent to ensure you have all the coverage you need.

Sometimes your health insurance offers medical coverage in case of an accident. And your renter’s or homeowner’s insurance covers your personal effects kept in the rental car. Read those policies, too, before you buy any additional insurance at the rental car counter.

You can also buy third party coverage

Say your basic American Express coverage isn’t quite ideal. You can opt for third party coverage through their Premium Car Rental Protection program. Third party coverage allows you to bypass your primary insurance company, saving you money on your monthly premiums. There are multiple carriers that offer this type of coverage.

Through American Express Premium, for instance, you pay a flat rate of $24.95, which covers you for theft and damage, accidental death and dismemberment, excess medical, and excess personal property coverage. If you back into a palm tree, there’s no deductible either. All your out-of-pocket expense is wrapped up in the flat rate, assuming you stay below the $100,000 damage threshold. Okay. So, now you have collision through your personal auto policy, supplemental through your credit card company, and you can buy additional coverage through a third party plan.

Do you still need coverage? That’s up to you. Third party coverage allows you to bypass your primary auto and basic credit card coverage, but it does not always offer liability protection.

If you want to be fully covered, opt for liability insurance. You may choose liability coverage offered at the rental car counter, but shop for liability coverage before you take off. After all, you’re in paradise for your peace of mind, not to make critical shopping decisions before you leave the airport.