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Rental Car Insurance Part 1: Understanding Rental Car Insurance

2018 06 21 blog rentalcarinsurance rental car counter woman explaining contract 2

By Madeline Klein on July 11, 2018 in Insurance Basics

At one point or another, you’ve probably been on vacation and reached the counter of a rental car company. You waited in line forever and are ready to finally start your trip. You were so close, but then they asked if you’d like to add on rental car insurance. Great question, right?

Like most of us, you probably hesitated and thought, “Do I need rental car insurance?” You quickly thought back to the last time you reviewed your auto insurance policy and racked your brain to remember what your coverage includes. If you couldn’t remember, you probably added on the suggested rental car insurance, unsure of if it was really necessary.

We never want you to spend extra money if you don’t have to, so we dug into this question to help you the next time you’re standing at that counter, wondering what to do.

What is rental car insurance

Rental car insurance is there to protect the rental car while it’s in your possession. Most rental car companies typically offer:

  • Liability coverage
  • Collision Damage Waiver (CDW), also known as a Loss Damage Waiver (LDW)
  • Personal accident insurance
  • Personal effects coverage

Now, let’s dive into each of these options and if you should get them or not.

Rental car liability insurance

Liability coverage is a staple of most car insurance policies, so you’ve likely already got this. If you have liability coverage for your everyday vehicle, it typically transfers to any similar rental car you get. If you have Say’s Liability car insurance, it includes Bodily Injury, as well as Property Damage and will keep you covered when you're using a rental.

The rental car liability insurance costs around $15 a day, and that usually gets you up to $1,000,000 in excess liability protection. But to be sure, you’ll want to ask the company how much coverage you get.

Springing for the rental car liability insurance really depends on how much coverage you feel you need for your trip. If you have high limits for your policy’s Liability coverage, you may skip this one. However, if you are wanting some extra coverage on your trip, you could look into the additional coverage.

Rental car collision damage waiver (or loss damage waiver)

A Collision Damage Waiver is a waiver (crazy, right?) that means the rental car company is waiving any claim they have against you if the car gets damaged or stolen while you have it. You won’t be held responsible if say, you park in a less than great neighborhood and when you walk out from your hotel in the morning, the car is gone. Be careful with this one though. If you do purchase this waiver, it will usually override your auto insurance. The insurance you have would not apply if damages occur.

The waiver also covers any “loss of use” time. If the rental car has to be in the shop, towed, or someone illegally takes the car for a joy ride, this means you wouldn’t pay for the time the rental couldn't be used.

Depending on how covered you want your rental car to be, you may want to consider the waiver. There typically isn’t any traditional auto insurance that provides the same security that this waiver does. However, this is one of the more expensive parts of rental car insurance and can cost between $10-30 a day. Some rental car companies break up these two waivers, so read through your options with an eagle eye.

Rental car personal accident insurance

Personal accident insurance would cover your medical bills if you got in an accident in the rental car. This is a cheaper coverage, typically around $5 a day, but you may not need it if you have similar auto insurance coverage.

Medical Payments would be one coverage you may already have that would eliminate the need for Personal Accident Insurance. It helps pay your medical bills if you do get into an accident. Medical Payments is an optional coverage though, so you’ll want to check and see if this is in your policy before making your decision.

Rental car personal effects coverage

This coverage would protect your personal items and belongings in a car if the car or those items were stolen or damaged. And while burglary rates have decreased, you can never be too safe. While your auto insurance likely doesn’t cover the theft of items, your homeowners or renters insurance probably does. We suggest checking out those two policies before you head to the rental car company.

If you find you aren’t covered with your homeowners or renters, this may be a coverage you add on. It is typically about $4 a day, so it won’t break the bank for you.

Understanding the different types of insurance options for rental cars can take some time, but a little bit of research before your trip could potentially save you some money in the long run.

Madeline Klein is Say's Digital Content Producer. She graduated from the University of Missouri with a Bachelor of Journalism, emphasis in Strategic Communication. Her experience is in writing and digital media. Madeline loves using her creativity to write and design new and exciting pieces of work for Say!