Explaining Auto Hire Insurance

Hire car insurance is synonymous with rental car insurance. Rental companies offer a loss damage waiver, collision damage waiver, and personal accident insurance as hire car insurance.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jun 4, 2020

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Here's what you need to know...

  • Hire car insurance means the same as rental car insurance
  • If you hire a car, you will most likely be asked by the agency if you want their loss damage waiver, collision damage waiver, and personal accident insurance
  • You should know exactly what your credit card offers for rental car insurance and exactly what your personal car insurance policy covers, and then decide if you actually need any of the rental agency’s insurance

What does “hire” car insurance mean? If you are from the UK, this question may seem ridiculously easy to answer. In the U.S., our terminology is different and we may need a little help figuring it out.

In the states, when we need a short-term vehicle we rent a car; in the UK, they hire a car. So, hire car insurance is synonymous with rental car insurance.

We all know when we walk up to the counter of one of the many rental car agencies that they will ask us for our license and credit card, but many of us never know exactly how to answer the question the rental agent is about to ask, “Will you need insurance coverage for the vehicle?”

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For some of us, we believe we have enough coverage from our own personal auto insurance policy while others of us just play it safe and purchase it all.

Still others of us split the difference and take the coverage we think we don’t have or believe is sufficient enough on our current car insurance plan.

Let’s delve a bit deeper into hire care insurance (rental car insurance) and find out what we need to know and do the next time we are at the rental counter and the agent asks us that perfunctory auto insurance question.

LDW and CDW Explained

Loss damage waiver (LDW) and collision damage waiver (CDW) are common waivers that the car rental agencies ask us if we will need when we are renting one of their vehicles.

These waivers aren’t insurance, but an agreement between you and the company that they will not hold you responsible if the vehicle is damaged or wrecked.

In other words, the LDW provision acts as the company’s liability insurance plan. The CDW is an agreement that acts in the place of your comprehensive insurance. Sometimes, loss damage waiver is rolled into the CDW.

What you need to be aware of is that many times, the CDW becomes null and void if you were:

  • speeding
  • driving drunk or under the influence
  • performing other moving violations

The range of cost for CDW is roughly around $10 to $20 per day; LDW is usually $9 to $15 and covers up to $1 million if you are responsible for an accident or cause damage to property or persons.

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Personal Accident Insurance (PAI)

PAI is another type of car insurance coverage you are offered from the rental car agent. This coverage is an accidental death benefit and also provides medical coverage for both the driver and passengers in the vehicle. The ranges of the benefits are as follows:

  • $100,000 to $200,000 for accidental death coverage
  • $2,000 to $3,000 in medical coverage for injuries brought upon by an accident
  • $250 to $500 for ambulance expenditures

Using Your Credit Card to Rent Auto Insurance

Most credit cards provide some sort of insurance coverage when you are renting a vehicle. You do need to find out what exactly the credit card covers. Here are some things to look for:

  • Sometimes a credit card company has a broad range of coverage, but only at a particular rental car company.
  • The credit cards may provide liability coverage but leave you out in the cold for damages to your property and person.
  • You need to read the fine print on some of these credit card policies because although it may seem they are giving you comprehensive coverage, really all they are doing is covering the deductible of your personal insurance auto provider.
  • Another element of these credit card policies to look a bit deeper into is if there is a finite number of days where coverage ends.

The Value of Rental Car Insurance

There is definitely a value in using rental car insurance for those who are only insured for the required standards in their state. The minimum standards usually will not be enough if you were to get into an accident with a rental car.

If you have full coverage, more times than not, you will not need a loss damage waiver or collision damage waiver from the car rental agent.

In regards to personal accident insurance, if you have solid health and life insurance, the PAI policy is not needed for you either.

You should always check with your personal insurance agent to find out what exactly comprises your auto insurance policy and what areas, if any, you may need more insurance if you hire a car.

Everyone’s financial and auto insurance situation is unique to them, so it’s imperative you look at the idea of car insurance from a broad view.

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