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rental car coverage is always necessary

debunking a car insurance myth

When you rent a car, it can be hard to know if you need rental insurance coverage. For some drivers it's a necessity, and for others it's a redundant expense.

If you have solid car, health, and homeowners/renters coverage, you can probably decline the extra protection and save a fair amount of cash. But if you're less than optimally insured, you may want to add rental car insurance.

Know your current coverages

Check your car insurance policy or call your insurance company to find out which coverages extend to your rental car. The limits and deductibles on your policy still apply to your rental car so long as you drive it for personal use. If it's a commercial or business rental, your personal car insurance coverage may not apply.

If you'll be paying for the rental with a credit card, check with your credit card company to see what additional rental car coverage is provided. Call the number on the back of the card you use to pay for the rental before buying extra protection.

Know your at-the-counter options

As this video from the Insurance Information Institute (III) explains, there are generally 4 coverage options available when you rent a car.

  • Loss-damage waiver (aka collision damage waiver)
    • Typically waives financial responsibility if the rental car's damaged or stolen; also covers loss-of-use charges while the rental's in the shop, towing charges, and related fees
    • Costs roughly $9–$19 a day
  • Liability coverage
    • This state-required coverage protects you from potential lawsuits
    • Costs around $7–$14 a day
  • Personal accident insurance
    • Covers medical costs after an accident
    • Costs $1–$5 a day
  • Personal effects coverage
    • Insures what you keep in the rental car
    • Costs $1–4 a day

The tempting add-on

Of the 4 rental car insurance coverages listed above, the loss-damage waiver offers the most protection. But if you have comprehensive and collision coverage on your car insurance policy, the value of your rental car is covered even in the event of a total loss. You'll only be responsible for the deductible, plus any added fees from the rental company.

Check with your insurer on whether rental car insurance is a good idea before you make a decision, and ask about potential administrative and loss-of-use fees levied by the rental company. Your comprehensive and collision coverage may be all you need.

Depending on your policies …

If you have reliable car insurance, renters/home insurance, and health insurance, you can save a good chunk of change by declining the other 3 coverages. Here's why:

  • When you buy car insurance, you're required to buy a state-mandated amount of liability coverage (except in New Hampshire, where it's optional), meaning you likely won't need to add it at the counter.
  • If you have health insurance, consider declining personal accident insurance if your health plan covers accident-related injuries. If you have personal injury protection and/or medical payments coverage on your car insurance policy, it would also offer the same protection if an accident occurs.
  • And finally, if you have renters or homeowners insurance with off-premises coverage, your things are already insured before you stash them in the rental car. So consider declining personal effects coverage as well.

Using the III's numbers as a guide, declining these 3 coverages can save between $126 and $294 on a week-long rental.

When rental car insurance coverage is a good idea

car

If you're not currently insured, you'll need to at least buy liability coverage from the rental company before you hit the road. Otherwise, rental insurance isn't legally required — which is not to say it can't help. If any of the following scenarios apply, the extra protection provided by rental insurance is worth considering:

  • Your current policy doesn't have comprehensive and collision coverage
  • You're only insured under a commercial car insurance policy
  • You don't want to risk paying a high deductible

And if you're driving abroad (apart from Canada), your current car insurance probably won't cover you. Check your policy's declarations to find out.

The truth about rental car insurance coverage

Adding the extra coverages can be a waste of money if your car insurance policy already provides the coverage you need. Take a few minutes to find out if your existing car insurance, your credit card company, your health plan, and/or your renters or homeowners insurance have you covered.

You could save a pretty penny and leave the rental counter knowing you made the right decision.

Related links

Rental car reimbursement coverage
This coverage is optional wherever Esurance is available.

International car insurance
Before you rent a car abroad, get a free insurance quote through Esurance's trusted partners.

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