Auto Insurance for Your Rental Car

The difference between rental car insurance and rental car coverage: You ask. We explain.

When your vacation includes a stop at the rental car counter, one question is sure to follow: “Would you like to purchase insurance?”

For many drivers, it’s a challenging question. In fact, 62 percent of consumers are unaware their personal auto policy provides rental car coverage and 24 percent don’t know whether their credit card provides rental car insurance.

Before you consider renting a car, it’s important to understand the differences between the various types of coverage:

  • Existing Auto Policy Coverage
    Your existing auto insurance policy may provide coverage for vehicles you rent. With this type of coverage, the same insurance coverage that you’ve purchased for the vehicles listed on your policy extends to your rental car. But, some exceptions may apply — so it’s important to verify coverage with your company.

  • Rental Car Insurance
    If your existing auto insurance policy does not provide rental car coverage — or enough coverage — you’ll need to purchase a separate rental car insurance policy. Rental car insurance is a short-term auto insurance policy, protecting you and the rental car while you use it. You can typically purchase a rental car insurance policy from the rental car provider. Some credit cards also provide this insurance as a perk.

  • Unrelated Coverage: Rental Expense Coverage
    It’s not related, but it’s worth mentioning Rental Expense coverage because the similar names often cause confusion. When you purchased your regular auto insurance policy, you probably had the option of purchasing Rental Expense coverage. If you did, this additional coverage provides payment for a rental vehicle in the event yours is not drivable after an accident.

Now that you understand the types of policies involved, you should weigh the following items before making your decision:

  1. If you hold a current auto insurance policy: Your existing coverage may extend to a vehicle you rent. But, you need to decide if the coverage is adequate for your needs.

    Confirm that your auto insurance policy covers damage, theft, injury to others and damage to property — and at what maximum limit. Many auto insurance policies may not extend coverage for the rental company’s expenses for loss of use, towing charges, or diminished value claims. If your policy does not, you would need to be comfortable taking on the risk of paying for those costs out of your own pocket. You may also want to review your deductibles; they will apply in the event you need to file a claim. And, any claim would be considered part of your driving history with your insurance company, which could impact the discounts or rate you receive.

    What kind of vehicle you’re renting, for how long, and where you’re traveling are also important factors to consider in determining if the coverage is adequate for your needs. Most auto insurance policies will extend coverage to a standard vehicle, but you may not be covered if you rent a high-priced, luxury vehicle, a large passenger van or a moving truck. Also, auto insurance policies may limit the number of days of rental coverage and coverage probably won’t apply if you are driving outside of the United States.

  2. If your credit card company offers rental insurance: It’s important to know the benefits and limitations. For example, some companies may provide reimbursement for collision damage or theft, but not injuries. Or, coverage may only kick in for expenses above and beyond what’s covered by a primary insurance policy. In other words, the credit card acts as a backup to cover the gap between what your insurance pays and what is actually owed.

    Other companies may exclude antique, exotic or sport utility vehicles (SUVs) from coverage, limit coverage to specific countries or provide coverage only for driving on regularly maintained roads. If your credit card company provides rental car insurance, you may also need to pay for the car rental using that credit card in order to access the coverage.

  3. If you purchase insurance from the car rental company: Based on your other coverage, you may decide a rental car insurance policy is still a good idea. Rental company insurance plans can protect you from costly, out-of-pocket expenses — and you wouldn’t need to involve your regular insurance company. But, make sure to clarify if coverage applies to multiple drivers or just one — and comply with the answer.

It’s best to do this research before you travel so you understand the coverage you have and car rental insurance you need. Then, you can sit back, relax and enjoy the ride.