How do I know I am covered for rental car insurance?

Rental car insurance coverage is sometimes offered through your personal insurance policy, otherwise, rental car insurance coverage through the rental company is expensive. However, it's best to pay more for rental car insurance coverage to save yourself in case of an accident.

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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: Jan 29, 2021

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Here's what you need to know...

  • Rental companies make a lot of money when you purchase insurance from them
  • It’s better to overpay for coverage than to risk the financial ruin of not be covered
  • Check your personal policy to see if it will cover you fully in a rental vehicle

Not everyone needs to buy third-party rental car insurance through the rental agency.

While a majority of individuals who own their own vehicle do have some form of coverage, as many as 60 percent of customers buy insurance when on average only 10 percent of renters need it.

Since the cost for physical damage coverage and liability coverage can be upwards of $25 per day, knowing when you are and when you are not covered can save you a pretty penny.

Since no one who is going on a trip for business or pleasure wants to pay more for their rental car than they absolutely have to, it is important to research the terms and conditions of standard auto insurance policies.

While every insurer has their own policy terms, it is standard for carriers in the United States to extend personal auto insurance from the covered auto to rental cars.

Coverage may be provided but rental cars are not always fully covered. Assuming a rental car has full coverage could be the worst mistake you could make before driving off of the rental lot.

If you are unsure about your policy, read on and find out how to determine if your rental will have coverage without paying that high supplemental waiver rate.

If you are in the market for a policy, start comparing auto insurance rates now by using our FREE tool below!

Review Your Current Coverage Options and Limits

To determine if the rental car insurance offered at the window of the agency is a waste of money, you need to know what you are currently carrying on your personal car insurance policy.

The only way for the piece of machinery that you will be driving on your trip to be covered without buying the coverage that is peddled by the agents is to have your own coverage from a personal car insurer.

As the policy contract is written, a rental car will be covered under the policy as an non-owned replacement vehicle.

This means that the personal liability and the physical damage coverage that appears on the declarations page of the renter’s policy will also cover the rental car that is on the rental car contract as long as the renter or a listed driver is driving.

You will want to check what your limits of the following are before setting off with the smooth-riding car.

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Personal Liability Coverage

Liability insurance consists of both bodily injury and property damage. In the states that operate under a fault-based system, bodily injury and property damage are the only two coverage options that are required.

Here is how each type of coverage works:

Bodily Injury (BI)

Covers to pay for the expenses to treat third-party injuries that are sustained in the accident. It will also pay for lost wages or funeral expenses if someone dies of accident-related injuries.

Limits for BI are on a per person and per accident basis and will stay in effect if you are driving a rental.

Property Damage (PD)

Covers to pay for the repair or the replacement of vehicles and other types of real property that the at-fault party is responsible for.

The coverage will not pay for repairs to the rental car or property owned by the insured of the policy. The limits that you carry for PD are on a per accident basis and will also stay in effect when driving non-owned rental cars.

What Happens if You Drive a Rental Without Liability Cover?

All states have some sort of financial responsibility law that applies to people who own vehicles registered to be driven on public roads.

Since you are renting a vehicle, you are not the vehicle owner and are not violating the law if you happen to drive without your own liability protection.

If you do not have liability coverage and are responsible for an accident, the third party does have the right to take you to court to recoup their damages

While liability insurance is not required for drivers who borrow a replacement vehicle, it is strongly recommended to protect your assets.

Not having liability insurance could become a huge issue that will haunt you for years to come or for your entire lifetime.

This is why it is worth it for renters to take the coverage offered at the additional cost if they do not have insurance.

Physical Damage Coverage

All policies include some limit of bodily injury and property damage coverage, but not all policies include physical damage coverage that will pay to repair the covered auto.

The coverage options that pay for damage repairs are referred to as comprehensive and collision. Here is how each type of coverage works if the renter carries them on their policy:


Comprehensive, which is also called other-than-collision, is the form of physical damage coverage that pays for damage to a covered auto for causes like fire, theft, vandalism, riot, glass breakage and more.

The policy will pay up to the fair market value of the car for the repair or replacement minus the deductible on the contract. If you rent a car, the coverage for the car with the broadest form of physical damage cover and lowest deductible will extend to the rental car.


Collision, as the name would imply, is the form of physical damage cover that pays for damage to the covered auto sustained in a collision. Like comprehensive, a deductible applies to collision losses.

The deductible must be exceeded for the insurer to pay for losses to a rental car when a collision is covered.

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What Types of Coverage does a Rental Agency Offer?

There may be a time where buying rental insurance is in your best interest. Those who do not have full coverage, who do not have personal auto insurance, or who have high deductibles may want to consider buying the optional coverage.

Here are some forms of cover you may be able to buy from a leading rental agency:

  • Damage Waiver
  • Loss of Use Waiver
  • Liability cover
  • Personal accident insurance for medical costs
  • Personal effects coverage for belongings

Rental car agencies do not want you to know that they make a huge profit on the insurance that they sell. To avoid paying for double the coverage, research the terms of your policy.

If you want to buy a new policy that affords more protection, start comparing auto rates now by using our FREE tool below!

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