Car Insurance for Rental Cars

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Joel Ohman
Founder, CFP®

UPDATED: Dec 16, 2019

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Here's what you need to know...
  • When driving a rental car, you need some coverage in place in case of an accident
  • In some cases, your current auto insurance will cover your rental
  • If you do not have car insurance, you will either need coverage through the rental company or possibly your credit card company

Drivers who own their vehicle are required to buy car insurance. Renters also need to have coverage in place to pay for injuries and damages caused when they are behind the wheel.

You can use your personal auto insurance policy for this purpose, use the protection offered by your credit card, or buy coverage from the car rental agency when you sign the contract and pick up the car. Consider the details below before deciding.

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Personal Policy


Your personal car insurance coverage will protect you when you are driving your own vehicle or a rented one, as long as your policy includes collision or comprehensive coverage.

Collision coverage pays for the cost of repairing the vehicle you are driving if it is damaged in an accident that involves hitting another vehicle or an object.

Comprehensive coverage pays out when the damage to the vehicle is due to a loss from wind, hail, flooding, fire, vandalism or theft.

If you decide to use your car insurance policy when you rent a car, you will need to pay your policy deductible before the insurance company will write a check for any damages.

The third party liability coverage you bought with your personal auto insurance can also protect you when you rent a vehicle.

It will pay for the medical bills, rehabilitation expenses and lost wages of the occupants of the other vehicle. You have coverage up to the policy limit you chose when you bought the policy.

It’s a good idea to either check your insurance policy or contact your insurance company to find out how car insurance you buy from the rental agency is treated if you are involved in an accident.

The rental car agency’s coverage may be considered excess to your personal coverage. If an accident occurs, the rental car policy will pay out first.

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Credit Card Coverage

You may have rental car insurance coverage in place through your credit card that will cover you if you use the card to pay for your rental.

If you have some time to plan your trip, contact your credit card company and ask them to send you a copy of the policy provisions. Once you receive the information, read it through carefully and compare it to the coverage you already have in place.

Some of these plans only cover physical damage to the rental car but do not offer any liability coverage to pay for the damages you cause to the occupants of the other vehicle or the vehicle itself.

Buy from the Agency


Rental car agencies will routinely offer insurance coverage to their customers when they pick up the vehicle.

The insurance they offer is called Loss Damage Waivers (LDW) and Collision Damage Waivers (CDW) and works in the same way as the collision and comprehensive coverage you have on your vehicle.

You may be required to pay a deductible if you are involved in an accident with the rented vehicle, so be sure to read the coverage terms carefully before you decide to buy the coverage.

Even if you do accept the coverage offered by the car rental agency, you may not be covered if you were under the influence, speeding, or driving in a reckless manner.

If you have already dropped your collision and comprehensive coverage, or you don’t own your vehicle (and don’t have car insurance), your best bet may be to buy your coverage from the car rental agency.

You will have some protection in place for the rental car, and it is available for a few dollars a day and only for the time you are using the vehicle. Buying the coverage from the car rental agency is a convenient way to put coverage in place.

Drivers know they need to have car insurance. Renters, who only need coverage for a set time, can choose to buy coverage from the car rental agency.

Other available options for people renting a vehicle are to check out the insurance coverage offered by their credit card company or to use their personal car insurance coverage to protect them in case an accident occurs when they are operating the rental car. Taking the time to consider all of these options will help you make the right decision.

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