Do I Need Car Insurance to Rent a Car?

Do You Need Insurance to Rent a Car?

Every U.S. state requires drivers to carry car insurance or proof of financial responsibility to drive legally. This means you'll need some form of coverage anytime you rent a car in the U.S. The car rental company will likely offer you a policy, but it's just one of several options you can use.

Typically, you can secure coverage in the follow ways:

• Use a personal car insurance policy
• Buy temporary insurance from the car rental company
• Rent the car using a credit card that provides rental car coverage
• Purchase short-term car insurance or non-owner car insurance

Does My Insurance Cover Rental Cars?

Your existing car insurance policy most likely provides adequate coverage for vehicles you rent for personal use in the U.S. or Canada. To be safe, check with your insurer to confirm your coverage before heading to the rental counter.

Basic auto policies include liability insurance and any other coverages required by state law. Full-coverage policies also include add-ons like collision and comprehensive insurance.

Here's what each type of coverage does:

• Liability insurance kicks in if you're at fault in an accident. This coverage pays for medical expenses when you cause an accident, and passengers in the other car are injured. It also covers damage you cause to someone else's property.
• Medical payments coverage or personal injury protection (PIP) covers the cost of medical care for you and your passengers, regardless of fault.
• Collision insurance pays to repair or replace the car if it's damaged in a collision with a vehicle, object or animal.
• Comprehensive insurance pays to repair or replace the car after any loss or damage that's not due to a collision—for example, theft, fire, vandalism or a tornado.
• Uninsured and underinsured motorist insurance covers your medical care and property damage if another driver causes an accident and doesn't have adequate insurance. It also covers you in hit-and-run situations.

Tip: Homeowners insurance and renters insurance often cover personal belongings even outside the home, like when you're in a rental car. Check with your insurance issuer to see if this extends to rental vehicles. This could be a lifesaver if your luggage or camera are stolen from the rental car during a trip.

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How to Use Your Credit Card for Rental Car Coverage

Many credit cards offer rental car coverage as a free benefit to cardholders. You may hear it referred to as insurance, but the coverage actually comes in the form of a collision damage waiver or loss damage waiver (more on that later). These waivers release you from some or all of the financial responsibility if your rental car is damaged or stolen.

To use your credit card for rental car coverage:

• Go over your credit card benefits. Log in to your online account, contact the card issuer or read the card agreement to find out whether your card offers this type of benefit. Also check whether it's secondary or primary coverage.
• Determine if you need supplemental coverage. Credit cards generally don't cover liability, personal belongings, medical expenses or personal injury. For those, you'll need to rely on your personal car insurance or rental car insurance.
• Pay for the car rental. Activating the benefit usually involves putting the car rental in your name and charging the costs to the credit card that offers the loss damage waiver.
• Decline the car rental agency's collision insurance. If you've determined you don't need it, you can choose to decline insurance coverage the rental agency offers.

If you need to file a claim, contact your card issuer for next steps. You'll typically need to provide photos of the damage along with copies of the accident report form, police report, auto rental agreement, repair estimate and itemized repair bill.

Types of Rental Car Insurance

Between your auto insurance and your credit card, your rental car may be fully protected. If not, you can fill in coverage gaps with insurance from the rental car company.

Rental car companies typically offer four kinds of insurance:

Loss Damage Waiver

Also called collision damage waiver, this coverage is similar to collision and comprehensive coverage. It waives your financial responsibility for theft of or damage to the rental car. Some policies also cover towing, administrative fees or loss of use fees. This waiver typically costs $15 to $30 per day.

Liability Insurance

Liability coverage pays for your legal costs if you cause an accident while driving a rental car. By law, rental car companies must offer the minimum level of liability coverage required in the state where you're renting the car. You can raise your coverage limits with supplemental liability insurance, which typically costs $8 to $17 per day.

Personal Accident Insurance (PAI)

Like medical coverage or PIP, PAI pays medical expenses for you and your passengers. PAI averages $1 to $5 per day. You may already have enough coverage for medical expenses through your personal health insurance plan.

Personal Effects Protection (PEP)

PEP pays to replace personal property stolen from your rental vehicle. This might be covered by your homeowners or renters insurance, but you'll have to pay the insurance deductible if you file an insurance claim. Since PEP averages just $1 to $2 per day, a PEP plan with no deductible could be a good deal.

How to Buy Rental Car Insurance

You can typically buy rental car insurance from the car rental company ahead of time when you reserve your vehicle. If you're not sure if you need it, however, you can wait until the last minute and buy rental car coverage when you pick the car up. Even if you don't plan to buy rental car insurance, it will typically be offered at the time you get the car.

You can also purchase rental car insurance through third-party car insurance companies. Allianz, Bonzah and RentalCover are among the companies that sell insurance for rental cars. Unlike the insurance sold by rental car agencies, however, you'll need to buy third-party rental car insurance before you pick up your vehicle.

Should I Get Rental Car Insurance?

Buying coverage through the car rental agency can be a good option in some cases.

Consider buying rental car insurance if:

• Your personal policy has minimal liability insurance or doesn't have collision and comprehensive coverage.
• You want to avoid filing a claim through your personal policy.
• You plan to drive the rental car outside the U.S. or Canada.
• You don't have your own car insurance or a credit card that provides coverage.

On the other hand, you may not need rental car insurance if:

• Your own auto insurance policy provides enough coverage.
• Your credit card offers supplemental coverage.
• You've purchased a stand-alone policy through a separate company.

The Bottom Line

Before leaving for your trip, research your auto insurance needs. Go through your personal car insurance coverage limits, and check whether you have a credit card that offers a car rental coverage benefit. Taking advantage of the protections you already have can help you safeguard your rental vehicle without paying for services you don't need. But if you want supplemental coverage, you can buy it through the car rental agency ahead of time.