Before you head out of town in a rental car, make sure you have sufficient insurance in case the vehicle is damaged while in your possession. The last thing you want to do is fork out a bunch of money to repair something you don’t even own. The rental company will give you some options for insurance when you sign the papers to borrow one of their vehicles. Should you pay for the extra protection, or does your personal auto policy already cover what you need?
This can be a confusing topic. Today, we’re going to share some tips to help make renting your next car as straightforward as possible. If you follow these guidelines, you won’t be taking unnecessary risks or doubling up on insurance coverage.
Does my auto insurance cover a rental car?
We’ll start by breaking this question down into two sections: what your auto insurance may already cover (depending on your policy) and what your auto insurance doesn’t cover. After that, we can pinpoint exactly what you should consider purchasing to supplement what you have so you can hit the road with confidence.
What Your Auto Insurance May Already Cover
Liability
If you have liability insurance, which is required in nearly every state, you shouldn’t need to purchase it from your rental agency. Your personal auto policy will protect you if you get into an accident that’s your fault. It should cover damage to someone else’s property and injuries you cause anyone—up to the limits of your policy. The only time it may be necessary to purchase additional liability insurance from a rental company is if you only pay for minimum liability and you’re worried your coverage is insufficient. In this case, you really should just increase liability insurance on your personal policy.
Physical Damage
If you have full insurance coverage, which includes both comprehensive and collision, you should already be covered for any physical damage to your rental car. Comprehensive coverage protects you against theft, hitting an animal, vandalism, and weather-related damage. Collision coverage insures you in accidents that involve other vehicles or property.
What Your Auto Insurance Won’t Cover
Loss of Use
If your rental car is damaged, the rental company could charge you the normal daily rate for the vehicle while it’s in the shop being repaired. If the vehicle isn’t repaired quickly, this unexpected cost can grow quickly.
Administration Fees
If you’re in an accident, your rental company will work with a third party to manage the claim. Any fees incurred while working with the third-party company can be billed to your credit card.
Diminished Value
Rental companies can claim that a vehicle damaged while in your possession has a lower resale value after being repaired. In this case, your credit card could be billed for the amount of the diminished value.
Does my credit card provide any insurance for my rental?
Many credit card companies provide some form of auto insurance for cardholders. It’s usually minimal, however, and not enough to replace other types of coverage we’ve recommended throughout this article. Your credit card might offer you extra protection that goes above and beyond what your rental company offers, such as coverage for additional fees you may be charged. Check with your credit card company for specifics.
What insurance options do rental companies offer?
You will likely be offered the following types of insurance when you rent a vehicle:
- Liability (covered by your auto policy)
- Loss/collision damage waiver (transfers financial responsibility from personal policy to rental company for damage and theft)
- Personal accident (may be covered by auto and health insurance)
- Personal effects (may be covered by homeowners or renters insurance)
What insurance should I purchase from my rental car company?
We recommend you buy the loss/collision damage waiver from your rental company. This waiver not only covers any physical damage to the rental, but it also covers the three items we listed above that your personal auto policy doesn’t cover: loss of use, administration fees, and diminished value. Additionally, it transfers the financial responsibility from your personal policy to the rental company, helping you avoid driving up your insurance rates. This waiver costs around $10–30 per day of use.
In conclusion, your auto insurance company will likely pay for most damages resulting from an accident in your rental car and give you liability insurance. To ensure you’re well protected and to avoid negatively impacting your personal auto rates long term, consider purchasing a rental company’s loss/collision damage waiver.
Check with your insurance company to confirm that everything else we listed in the “What Your Auto Insurance May Already Cover” section is taken care of. If something is not, consider supplemental rental car insurance in that area.
Note: This article was geared toward vehicles for personal use only. Your auto policy won’t cover commercial vehicle rentals. If you’re moving, for example, and renting a truck with a GVWR of 10,000 pounds or more, such as a U-haul or Ryder, your personal auto policy probably won’t cover it. Rentals for any commercial applications, such as renting a car to drive for Uber or Lyft, are generally also excluded.
Get a Quote
If you’re worried that your auto policy isn’t offering you the coverage you need, but you don’t know where to start looking for better options, we’d love to jump in and help you out. Coverage Direct offers several options for auto insurance that have been exhaustively vetted. We impartially shop numerous regional and national companies to ensure we find the best coverage at the best price for our customers.
