Car Insurance for Rental Cars: What You Need to Know

If you are planning to rent a car for your next trip, you might be wondering about car insurance for rental cars. Car insurance for rental cars is a type of insurance that covers you and the rental car in case of an accident, theft, or damage. It can protect you from paying out of pocket for repairs, medical bills, or legal fees.

According to a report by Statista, about 79 million people rented a car in the United States in 2019. However, renting a car also comes with some risks. According to another report by Statista, about 6.7 million car accidents occurred in the United States in 2018, resulting in 36,560 fatalities and 2.7 million injuries. Moreover, according to the FBI, about 748,841 motor vehicles were stolen in the United States in 2018.

But what are the main types of car insurance for rental cars and how do they work? In this article, we will explore the advantages and disadvantages of four types of car insurance for rental cars: rental car company’s insurance, personal car insurance, credit card car insurance, and travel insurance.

Type 1: Rental car company’s insurance

One of the most common types of car insurance for rental cars is the rental car company’s insurance. This is the insurance that is offered by the rental car company when you book or pick up your rental car. It usually consists of four types of coverages: collision damage waiver (CDW), supplemental liability protection (SLP), personal accident insurance (PAI), and personal effects coverage (PEC).

Collision damage waiver (CDW) is a type of coverage that waives your responsibility for paying for any damage or loss to the rental car due to an accident, theft, or vandalism. It usually costs between $10 and $30 per day. However, it might not cover all types of damage or loss, such as tires, windows, mirrors, keys, or towing fees. It might also have a deductible that you have to pay before the coverage kicks in.

Supplemental liability protection (SLP) is a type of coverage that protects you from being sued by other parties for bodily injury or property damage caused by an accident involving the rental car. It usually costs between $10 and $15 per day. However, it might not cover all types of liability claims, such as punitive damages, intentional acts, or contractual obligations. It might also have a limit that caps the amount of coverage you can get.

Personal accident insurance (PAI) is a type of coverage that pays for your medical expenses and death benefits if you or your passengers are injured or killed in an accident involving the rental car. It usually costs between $3 and $5 per day. However, it might not cover all types of injuries or expenses, such as pre-existing conditions, lost wages, or pain and suffering. It might also have a limit that caps the amount of coverage you can get.

Personal effects coverage (PEC) is a type of coverage that pays for your personal belongings if they are stolen or damaged while in the rental car. It usually costs between $2 and $4 per day. However, it might not cover all types of items or losses, such as cash, jewelry, electronics, or documents. It might also have a limit that caps the amount of coverage you can get.

Of course, rental car company’s insurance is not without its drawbacks. One possible downside is that it might be expensive and unnecessary if you already have other types of insurance that cover rental cars and drivers. For example, if you have personal car insurance that extends to rental cars, you might not need to buy CDW or SLP from the rental car company. Similarly, if you have health insurance or life insurance that covers you and your passengers, you might not need to buy PAI from the rental car company. Likewise, if you have homeowners insurance or renters insurance that covers your personal belongings, you might not need to buy PEC from the rental car company.

Therefore, before you decide to buy rental car company’s insurance, you should check your existing policies and see what they cover and what they don’t cover. You should also read the fine print of the rental agreement and understand the terms and conditions of the rental car company’s insurance.

Type 2: Personal car insurance

Another common type of car insurance for rental cars is personal car insurance. This is the insurance that you have for your own car and that might extend to rental cars as well. It usually consists of four types of coverages: liability, collision, comprehensive, and uninsured/underinsured motorist.

Liability is a type of coverage that protects you from being sued by other parties for bodily injury or property damage caused by an accident involving your car or a rental car. It is required by law in most states and has minimum limits that vary by state. However, it might not cover all types of liability claims, such as punitive damages, intentional acts, or contractual obligations. It might also have a limit that caps the amount of coverage you can get.

Collision is a type of coverage that pays for the damage or loss to your car or a rental car due to an accident with another vehicle or object. It is optional in most states and has a deductible that you have to pay before the coverage kicks in. However, it might not cover all types of damage or loss, such as tires, windows, mirrors, keys, or towing fees. It might also have a limit that caps the amount of coverage you can get.

Comprehensive is a type of coverage that pays for the damage or loss to your car or a rental car due to events other than an accident, such as theft, vandalism, fire, flood, or hail. It is optional in most states and has a deductible that you have to pay before the coverage kicks in. However, it might not cover all types of damage or loss, such as personal belongings, rental fees, or diminished value. It might also have a limit that caps the amount of coverage you can get.

Uninsured/underinsured motorist is a type of coverage that pays for your medical expenses and property damage if you or your passengers are injured or your car or a rental car is damaged by an accident involving a driver who has no insurance or not enough insurance. It is optional in most states and has a deductible that you have to pay before the coverage kicks in. However, it might not cover all types of injuries or expenses, such as lost wages, pain and suffering, or punitive damages. It might also have a limit that caps the amount of coverage you can get.

Of course, personal car insurance is not without its drawbacks. One possible downside is that it might not cover all types of rental cars and drivers. For example, if you rent a car that is more expensive or more powerful than your own car, you might not have enough coverage to pay for the full cost of repair or replacement if the rental car is damaged or stolen. Similarly, if you rent a car and let someone else drive it, such as your spouse, your friend, or your employee, you might not have any coverage if they are involved in an accident with the rental car.

Another possible downside is that it might affect your premiums and claims history if you use it for rental cars. For example, if you file a claim for an accident involving a rental car, you might have to pay a higher deductible than if it was your own car. You might also see an increase in your premiums or lose some discounts or benefits from your insurer. Moreover, you might have a record of the claim on your personal car insurance history, which could affect your future rates and eligibility.

Therefore, before you decide to use personal car insurance for rental cars, you should check your policy and see what it covers and what it doesn’t cover. You should also contact your insurer and inform them of your plans to rent a car and see if they have any restrictions or requirements.

Type 3: Credit card car insurance

A third type of car insurance for rental cars is credit card car insurance. This is the insurance that is offered by some credit card companies when you use their card to pay for the rental car. It usually consists of one type of coverage: collision damage waiver (CDW).

Collision damage waiver (CDW) is a type of coverage that waives your responsibility for paying for any damage or loss to the rental car due to an accident, theft, or vandalism. It usually costs nothing extra as long as you use the credit card to pay for the entire rental transaction and decline the rental car company’s CDW. However, it might not cover all types of damage or loss, such as tires, windows, mirrors, keys, towing fees, personal belongings, personal injury, liability, or diminished value. It might also have a deductible that you have to pay before the coverage kicks in.

Of course, credit card car insurance is not without its drawbacks. One possible downside is that it might not cover all types of rental cars and drivers. For example, if you rent a car that is not eligible for credit card car insurance, such as a luxury car, a sports car, a truck, or a motorcycle, you might not have any coverage at all. Similarly, if you rent a car and let someone else drive it, such as your spouse, your friend, or your employee, you might not have any coverage if they are not authorized users of your credit card.

Another possible downside is that it might not be enough to cover the full cost of repair or replacement if the rental car is damaged or stolen. For example, if you rent a car that has a value of $30,000 and it is totaled in an accident, you might have to pay the difference between the value of the car and the amount covered by your credit card car insurance. You might also have to pay for any fees or charges imposed by the rental car company, such as loss of use, administrative fees, or depreciation fees.

Therefore, before you decide to use credit card car insurance for rental cars, you should check your credit card agreement and see what it covers and what it doesn’t cover. You should also contact your credit card company and confirm your eligibility and coverage for renting a car.

Type 4: Travel insurance

A fourth type of car insurance for rental cars is travel insurance. This is the insurance that you buy when you book a trip or a vacation that covers you for various travel-related risks, such as trip cancellation, trip interruption, baggage loss, medical emergencies, or travel accidents. It might also include some coverage for rental cars and drivers.

Travel insurance might cover rental cars and drivers in two ways: as part of the trip cancellation or interruption coverage or as an optional add-on. The trip cancellation or interruption coverage might reimburse you for the cost of renting a car if you have to cancel or cut short your trip due to a covered reason, such as illness, injury, death, weather, or terrorism. The optional add-on might provide some coverage for damage or loss to the rental car due to an accident, theft, or vandalism.

For example, if you buy travel insurance for a trip to Hawaii and you book a rental car as part of your travel package, you might be able to get some reimbursement for the rental car if you have to cancel your trip due to a hurricane. If you buy travel insurance for a trip to Europe and you add an optional rental car coverage to your policy, you might be able to get some coverage for the damage or loss to the rental car if it is involved in an accident with another vehicle.

Of course, travel insurance is not without its drawbacks. One possible downside is that it might not cover all types of rental cars and drivers. For example, if you rent a car that is not part of your travel package or that is not booked through an approved agency, you might not have any coverage at all. Similarly, if you rent a car and let someone else drive it, such as your spouse, your friend, or your employee, you might not have any coverage if they are not listed on your travel insurance policy.

Another possible downside is that it might have many restrictions and conditions that limit or exclude your coverage. For example, if you rent a car and drive it in a country or an area that is not covered by your travel insurance policy, you might not have any coverage at all. Similarly, if you rent a car and drive it in a way that violates the rental agreement or the local laws, such as speeding, drinking and driving, or off-roading, you might not have any coverage at all.

Therefore, before you decide to use travel insurance for rental cars, you should check your policy and see what it covers and what it doesn’t cover. You should also read the fine print of the rental agreement and understand the terms and conditions of the rental car company.

Conclusion

Car insurance for rental cars is a type of insurance that covers you and the rental car in case of an accident, theft, or damage. It can protect you from paying out of pocket for repairs, medical bills, or legal fees.

There are four main types of car insurance for rental cars: rental car company’s insurance, personal car insurance, credit card car insurance, and travel insurance. Each type has its own advantages and disadvantages, depending on your needs and preferences.

Before you rent a car, you should compare and choose the best type of car insurance for rental cars for your situation. You should also check your existing policies and agreements and see what they cover and what they don’t cover. You should also contact your insurer, credit card company, or travel agent and confirm your eligibility and coverage for renting a car.

If you are interested in getting a quote or finding out more about car insurance for rental cars, please contact us today. We will be happy to help you find the best deal for your trip.