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What is rental car insurance and why do I need it?

You’ve picked a rental car and are ready to zoom off on vacation. Then the representative at the desk asks if you want rental car insurance.

You reflexively say no, but the representative warns that you may want to reconsider. What do you do?
As it turns out, most people won’t need rental car insurance. However, you may want to consider buying it if your personal insurance lacks coverage in some areas.

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What is rental car insurance?

The rental car insurance you’re offered at the counter comprises several policy options. None of these policies are mandatory.

In fact, certain types of coverage may be unnecessary because you may already be covered by your own car insurance.

You’ll likely come across four types of rental car coverage:

  • Personal accident insurance
  • Collision damage waiver
  • Personal effects coverage
  • Supplemental liability protection

Let’s talk about each of these policies and why you might need them.

Personal accident insurance

Personal accident insurance covers you and your passengers in any accident. Specifically, you’ll be covered for the costs of medical assistance, ambulances and death up to your coverage level.

Should you get it? Consider passing on this. You probably don’t need medical coverage if you have health insurance. Most insurance policies offer reimbursement for ambulance rides too.

However, this coverage could be worth buying if you’re worried about death benefits and don’t have life insurance.

  • Typical cost: $1 to $5 per day
  • Typical medical coverage: $3,500
  • Typical ambulance coverage: $150
  • Typical death benefit: $175,000 for renter; $17,500 for passenger

Collision damage waiver

With a collision damage waiver, you’ll pay a reduced cost or nothing at all if your rental car is stolen or damaged. This is also called a physical damage waiver or a loss damage waiver.

Should you get it? Double check your own auto insurance — it probably already covers damage to rental cars. It’s worth doing a bit of research in case your insurance doesn’t protect you.

  • Typical cost: $9 to $19 per day
  • Typical coverage: Varies depending on rental car agency

Personal effects coverage

Personal effects coverage reimburses you for the theft of your possessions from the rental car. This coverage typically extends to members of your family as well.

Should you get it? Coverage for stolen items usually falls under homeowners insurance. Check your own insurance to see if it protects you. (It probably does.)

  • Typical cost: $1 to $4 per day
  • Typical coverage: $500 to $1,500 per person

Supplemental liability protection

Supplemental liability protection will cover you if you damage someone’s car or property or if you’ve incurred medical costs for injuring someone.

Should you get it? You probably have liability coverage from your own insurance policy. If you think your coverage is too low, supplemental liability protection can be a stopgap measure — but you may want to consider umbrella insurance for the long term.

  • Typical cost: $7 to $14 per day
  • Typical coverage: $1 million

Why should I buy rental car insurance?

The main reason you should buy rental car insurance is if your own policy doesn’t protect you. Even then, you might decline rental car coverage. For example, you may feel your belongings are easily replaceable; in that case, you might decline personal effects coverage.

Generally, your insurance will cover rental cars — but it’s a good idea to be sure. Check your own policy or call your insurance agent. And keep in mind that if your insurance does cover rental cars, you will still have to pay your deductible in case of an accident or any damage.

Check your credit card’s terms for rental car coverage

Your credit card may offer some form of insurance for rental cars. But to qualify for the coverage, you’ll probably need to use the card for the entire cost of the rental.

If your credit car does offer this benefit, be sure that it applies in your situation. Are you renting a car abroad? Make sure your credit card covers rentals in that country. Are you renting an RV or motorcycle? The rental coverage benefit might be excluded for these types of vehicles. So call your credit card’s customer service line to verify that your rental will be covered before assuming that it does.

How do I buy rental car insurance?

When you rent a car, the representative at the counter will ask whether you’d like to add insurance. To make a smart decision, it’s a good idea to know beforehand what your personal insurance already covers.

How to protect yourself from a damage claim

It’s not often that a car rental company will make a damage claim against you, but it can happen. And if it does, you could be on the hook for hundreds or even thousands of dollars in damage if you’re not covered by insurance. So you’ll want to be protected.

Here are some steps you can take to protect yourself from a possible damage claim from the rental company:

  • Inspect the rental car with an employee and note in writing all of the existing damage, no matter how minor.
  • Take pictures of any damage before leaving the lot and make sure the photos are timestamped.

Even if you are covered against damages by insurance, it’s a good idea take these precautions to insure you’re not held liable. Some rental companies even require that you inspect the car before they turn over the keys. A little precaution could prevent a future headache.

Bottom line

You probably won’t need to buy rental car insurance. However, it can be a smart choice if your personal car insurance lacks coverage in certain areas.

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Find the cheapest rates

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