Do You Need to Buy Rental Car Insurance?

Rental car insurance can be confusing. You need to make sure

Don´t wait until you´re in a quandary at the rental counter. Before your next business trip, find out if you´re covered through your own automobile insurance policy or through your credit card company.

Auto Insurance
Call your agent to find out what your auto insurance policy covers when you rent a car. To be properly covered in your rental, your existing policy must include liability, comprehensive and collision coverage for rental vehicles. Liability insurance covers you if you injure another person in an accident, and comprehensive and collision insurance cover you if you damage the rental car.

Credit Cards
After you know what your auto policy covers, check with your credit card company. Some credit card companies offer collision and theft insurance when you use their card to pay for a rental, but this coverage is usually secondary to your personal auto policy. Significant restrictions may apply: For example, the card company may require that you decline the rental agency´s collision damage waiver — a provision of your rental agreement that limits your liability for damages to the car.

Remember, a credit card will only cover damage to the car, not liability claims against you. That means your credit card won´t protect you if you injure others or destroy property. In addition, this coverage might exclude business use or be limited to a certain period of time and geographic area.

Rental Insurance
If you don´t have adequate coverage through your auto insurance policy or credit card, you should purchase coverage through the rental agency.

The most misunderstood part of rental insurance is the collision damage waiver. A collision damage waiver isn´t really insurance; instead, it´s a guarantee that the rental company will pay for certain damages. Rental agencies offer collision damage waivers or loss damage waivers for about $14 to $20 per day. If you decline the collision damage waiver, you accept responsibility for all damages.

The collision damage waiver also covers "loss of use" — the money a rental agency loses when the vehicle can´t be rented due to damages. In most states, an automobile insurance policy won´t cover this cost.

In addition, when you damage a rental car, some agencies will expect you to pay up front for repairs or replacement costs. This means the money comes from your pocket, and you must get reimbursed by your auto insurance company. The collision damage waiver protects you from these up-front costs.

In addition to the collision damage waiver, most rental agencies offer:

• Supplementary liability insurance, which acts as secondary coverage to your personal policy
• Primary liability insurance for drivers who don´t have auto insurance policies or don´t want to use them
• Personal accident insurance
• Personal effects protection that insures your belongings