The Best Rental Car Insurance Policy

Rental car insurance can come from the rental company, your credit card company, or your car insurance policy. Compare options and don't assume your current policy includes rental car insurance.

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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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 9, 2020

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Here's what you need to know...

  • Rental car insurance is more important than you think
  • Don’t assume your auto insurance policy covers rentals
  • Look into your rental car company’s coverage
  • Some credit card companies also provide rental car coverage

If you are looking for a vehicle to rent, car insurance will need to be a priority.

Whether you need a new rental car insurance policy or you think you have rental insurance coverage on an existing policy, you need to ensure that all your bases are covered.

No matter how often you drive a rental car, having the appropriate car insurance coverage is important. It is illegal to drive any type of car without auto insurance, and it isn’t fair to other drivers or passengers in your vehicle if you don’t have the appropriate protection.

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Rental Car Insurance Protects You

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If you have an accident while driving a rental car, instead of showing your own personal insurance information, you provide the rental car company info and your customer info. The rental car company takes care of the bill, and then your insurance company pays the car rental company.

The cost of rental car insurance is usually worth it.

All car insurance companies offer rental car insurance when you rent a vehicle from them. Did you know, however, that most people turn down this coverage? You have probably refused it yourself, assuming that your current auto insurance coverage provides you with the coverage you need.

Many people assume that purchasing rental insurance directly from the rental car company is too expensive, but there are valid reasons why you should consider this option first.

You also need to be aware of whether or not you have other types of coverage options, especially if you have an accident while driving your rental car.

Keep reading to learn why you should consider the rental car company option and what other options you have that may save you money.

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Car Insurance from the Rental Car Company

Once you tell a rental car company what type of vehicle you want, they will ask whether you want to purchase car insurance for your rental vehicle. If you are like most people, you emphatically say no, convinced that this is a rip-off.
However, car insurance directly from the rental car company can actually be a great idea.

Try thinking about your car insurance options in other terms:

  • What happens when you have an accident? – You call your insurance company, and you make a claim.
  • What happens when it is time for your auto insurance policy to renew? – Your auto insurance rates increase, sometimes twice as much as you were paying before.

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Although how much your insurance increases depends on how bad the accident was, your rates are going to go up.

If you had said yes to the car rental company, then you wouldn’t have to file a claim with your own insurance company. If you caused the accident, points will accrue to your license, but because your insurance company didn’t have to pay out, you will only see a minor increase due to the points accrued.

Typically, rental car insurance is about $13 a day. Considering you could see an increase in your insurance of up to $1,000 annually, isn’t there some value to paying a bit extra now just in case you have an auto accident?

Of course, there are those individuals who travel on a budget, and paying extra simply may not be an option. If that sounds like you, then there is another option to consider before you use your own car insurance for your coverage.

Car Insurance from Your Credit Card Company

In a majority of cases, a credit card is needed when you are getting a car to rent. Car insurance from your credit card company may already be in play. You see, many credit card companies offer rental car insurance as a benefit to using their card.

It is important that you don’t assume your credit card company offers rental car coverage. Check the terms of your agreement to be sure. If your credit card company does offer this option, you may not need any other type of insurance.

In addition to ensuring that you have coverage, do the following:

  • See how much coverage they provideIt won’t do much good to have a $2000 max on payouts if you end up totaling your rental vehicle. Car insurance needs to cover the value of the rental vehicle.
  • Know the accident procedureIn the event of a rental car accident, follow the correct procedure so that the credit card company will pay the claim to the rental car company.

Most credit card companies require you to file your claim within 30 days. Some give you as long as six months, but that is rare.

You want to get everything in order as quickly as possible, avoiding the hassle of obtaining a bill from the rental car company and/or having them max out your credit card to pay off some of your debt.

Does Your Standard Insurance Policy Work?

Remember, your regular auto insurance may not even cover rental cars. Many car insurance companies are omitting this coverage from their policies in order to provide customers with more competitive rates.

If your car insurance company does provide you with rental car insurance, you need to understand the terms.

In most cases, your rental car coverage will have the same options as your regular coverage. In other words, your coverage level isn’t based on your vehicle; it is based on your max coverage amounts.

With that being said, if you have comprehensive insurance for your 2005 Toyota and you have a mind to rent a Lamborghini, then your total max coverage amount on your current policy isn’t likely going to cover the cost of a totaled Lamborghini unless you are paying for too much coverage on your vehicle.

If you are renting a vehicle that is well outside of the price range of what you currently drive, then you may want to purchase a supplemental temporary policy to cover the difference. While you aren’t hoping for an accident, you need to plan for one, just in case.

The bottom line is that you need to understand all of your options when it comes to renting a car. Understanding what each option means for you could actually save you a lot of money over time.

Regardless, before you purchase car insurance at all, you need to get a quote first.

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