Rental Car Insurance - Do You Need It?

Michael Russell

First of all, most U.S. drivers already carry auto insurance which will provide full or partial protection while driving a rental car (within certain dollar limits and coverage only for rentals within the United States and, sometimes, Canada). Some insurance policies only cover cars rented while your own car is being repaired, while most do not cover certain types of vehicles, like luxury cars or vans. Check your own personal policy for these limitations and exclusions.

Even with these limitations, your personal auto insurance will be the primary source of coverage if you have an accident or suffer injury while driving a rental car. Other types of coverage, such as credit card policies and the rental company's optional insurance offered at the time of the booking, will be subrogated. This means it will not apply until you have reached the maximum of your own auto insurance coverage. Also, be aware that your personal auto insurance rates may increase if you file a claim for damaging a rental car.

Some states have legislature in place requiring rental companies to inform you that their insurance coverage may duplicate your personal auto policy, though these laws do not specify how you must be notified. The best way for you to do is to talk directly with your auto insurance agent before you rent a car and ask the following questions.

What geographical area does my policy offer rental coverage in? (Generally speaking, auto policies cover the U.S. and Canada only.)

How much liability coverage do I currently have? (If you own an older car, for example, you may carry only the minimum amount of liability coverage that is required by the laws of your state, a level that may be insufficient to protect you against the risk of completely replacing a brand-new rental vehicle or, potentially even worse, paying an excessive personal injury claim.

How much is my deductible? (Are you willing to pay that amount out of pocket if you have to file a claim for damaging a rental car?)

Does my policy cover only the value of the vehicle(s) listed on my policy? (If so, you should compare that value to the replacement cost of the type of car you will be renting.)

Does my policy cover theft and collision damage? (Most U.S. drivers already carry collision coverage that can replace the protection sold by rental car companies.)

In the end, the decision of whether or not to purchase optional extra insurance from a car rental company is yours, of course. Consider well the value of the insurance against the cost and bear in mind the above information and make the decision with all the facts.