Do I Really Need Rental Car Insurance?
A little research beforehand will help you know what to say at the rental car counter
If you’ve ever rented a car you know the tension that comes when the rental car agent asks, “Do you want the insurance with that?” You have moments to decide. You panic and make a rash decision, vaguely aware that your own auto insurance policy and even your credit card might cover you — but for what, exactly?
Whatever decision you make may be the wrong one — you buy insurance you probably don’t need or you don’t buy insurance you do need — if you didn’t get all the facts first.
There’s no question you need insurance to drive. According to the Department of Motor Vehicles, every state requires motorists to carry a minimum level of auto insurance coverage (or the equivalent in financial responsibility waivers). Such coverage is necessary to pay for damage to property or injuries to people caused by an accident.
But if you own a car, your rental car may already be covered.
Here’s what you need to know about the different types of coverage and why you might already have each. Rental car insurance is state regulated. Therefore, the types of coverage and the cost will vary from state to state. But these are the main types.
1. Loss damage waiver (LDW). This is also called Collision Damage Waiver (CDW). It is not technically an insurance product. Rather, it “waives” the driver of financial responsibility if there is damage to the rental car or if it is stolen. If you refuse this product and aren’t covered by your own auto insurance policy, you assume responsibility for any damages to the car up to its full value.
Coverage can be retracted if damage to the rental car results from:
- negligent driving
- driving on an unpaved road
- taking the car out of state
- driving while intoxicated
- letting an unauthorized person drive the car
Do I need this?
If you own a car, the comprehensive/collision portion of your own auto insurance policy should cover damage to the rental car. Consider purchasing LDW if you’ve dropped that coverage to save money on your car insurance (LDW is not required by law, though if you financed the car through a lender, the lender may require you to carry it, since they technically own the car).
Related: Drive Safe, Arrive Alive
2. Liability insurance. Liability insurance provides coverage for the other driver’s medical expenses and damage to their property if you caused the accident. According to the Insurance Information Institute (III), the law requires car rental companies to provide the state required minimum levels of liability coverage. It’s a cost of running their business. However, the level of coverage they provide is low (based on the state minimums) and does not offer you much protection in case of a serious accident.
Do I need this?
Not if you have your own auto insurance, which by law must include liability coverage. Review the policy or call your insurance agent to determine if the level of liability coverage is sufficient. If you don’t have a car, then consider purchasing the additional coverage from the rental car company.
3. Personal accident insurance. This insurance covers the driver’s and passengers’ medical bills resulting from an accident.
Do I need this?
If you have either health insurance or auto insurance, you should be covered already. The portion of your auto insurance that covers you is referred to as personal injury protection (PIP). Check to see how much you’re covered for.
4. Personal effects coverage. Personal effects coverage protects your belongings from theft. If items are stolen out of the rental car it should reimburse you for those items.
Do I need this?
Not if you have homeowners insurance or renters insurance. Most policies cover theft of personal items that occur away from your primary residence.
Know before you go
The bottom line: Find out what you’re already covered for before you spend money on rental car insurance that could otherwise go toward a dinner out. If you’re not sure exactly what your policies cover, call and inquire. Ask specific questions about what your policy covers in case you have an accident with a rental car.
A second phone call to make would be to your credit card company. Many credit card companies provide both collision (not liability) and theft protection if you use their card to rent the car. These benefits usually kick in after your other insurances have been exhausted. If you don’t have the other insurance policies, you shouldn’t count on your credit card to pay. You should purchase the coverage offered by the rental car company.