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The Savvy Traveler's Guide to Overseas Rental Car Insurance

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When you’re jet-lagged and eager to get on the road, the very last thing you want to do is try to figure out what kinds of rental car insurance you need. CDW? LDW? Comprehensive? Zero liability?

Our best advice: Do it ahead of time! Overseas rental car insurance requirements vary by country, so research your destination before you go. Consider purchasing the Rental Car Damage Protector from Allianz Global Assistance, which provides primary coverage for covered collision, loss and damage up to $40,000, in almost every country, for only $9 per calendar day.

Here, we’ll look at how car rental insurance works in some popular overseas travel destinations.

How does rental car insurance work in Europe?

The good news is that liability insurance is typically included with the price of your car rental in Europe. (Liability is the part of your insurance that can cover injuries you may cause to other people while driving, or damage to other people’s property.) The bad news is that collision coverage for the rental car itself is not included. When you rent a car in Europe, the company will usually require you to purchase a collision damage waiver (CDW). This isn’t technically insurance, but an agreement that if the car’s damaged, you won’t be financially responsible.

CDWs sold by European rental car agencies have a few issues, however:

  • They’re expensive. A CDW in Europe will generally add 30 to 40 percent to the daily rate, or $10 to $30 per day.i
  • They don’t cover the whole car. These waivers usually exclude your tires, windows, roof, undercarriage, side mirrors and interior. That’s a big chunk of the car!
  • They may have big deductibles. You could pay a deductible of $1,000-$2,000, even if the damage was someone else’s fault.ii You can avoid this by paying even more per day for a “super CDW” or “extended CDW,” which has no deductible.
  • Theft insurance may cost even more. An LDW (loss damage waiver) may add an extra $5 to $12 per day.iii

That’s why the Rental Car Damage Protector is a much better option. It’s affordable. It’s actually insurance (not just a waiver). It covers the entire car, bumper to bumper; it has zero deductible; and it covers theft as well as damage caused by things like fires, storms and vandalism.

Do know that in some countries in Europe, rental car insurance may work a little differently. In Ireland, regulations prohibit the use of third-party insurance, so you must purchase it from the rental car agency. (The Rental Car Damage Protector does not cover rental cars in Northern Ireland and the Republic of Ireland.)

How does rental car insurance work in Australia?

Rental car insurance policies in Australia are similar to those in Europe, but the terminology is a little different. Compulsory third party insurance — which Americans would call bodily injury liability — is mandatory, so it’s included in the base charge for the rental car. Rental car companies carry comprehensive insurance to cover damage to the rental car.

However, the renter is responsible for paying an excess (aka deductible, or damage liability fee) that can be as high as $8,500 (AUD; around USD $6,250) for four-wheel drive or luxury vehicles.iv You’ll have to pay the excess when your car is damaged. Even if the accident wasn’t your fault, your credit card will still be charged for the excess until the rental car agency can recover the money from the person who was at fault. Car rental (car hire) agencies will offer to reduce this excess for an additional per-day fee. But your best bet for protecting your rental car will be the Rental Car Damage Protector.

How does rental car insurance work in Costa Rica? 

Exploring Costa Rica’s lush rainforest and dual coasts sounds like a dream vacation. Renting a car in Costa Rica, however, can be a hassle. You may see absurdly low rates advertised — we’re talking just a few dollars a day — and then, when you get to the rental counter, discover that you have to pay a lot more in taxes, fees and insurance.v “The cost of insurance can approach or exceed the cost of renting,” write the travel consultants of Costa Rica Travel Guide.vi

When you’re renting a car in Costa Rica, liability Insurance is mandatory, and costs an additional USD $10 to $20 per day. Protection for the rental car itself is optional, but rental car agencies will strongly encourage you to buy it all: a collision damage waiver for accident-related damage as well as “zero liability” coverage, which protects you from paying for damage caused by vandalism, theft, weather or other mishaps.vii Remember that the Rental Car Damage Protector includes protection for covered collision damage, loss, theft and more.

How does rental car insurance work in Mexico? 

Many travelers don’t realize that their U.S. car insurance will not cover them in Mexico. This can be a serious mistake: Mexican law says that if you get into an accident and you’re uninsured, you may be arrested and detained until all damage is paid for.viii

The good news is that if you rent a car in Mexico, the mandatory liability insurance — which covers bodily injury and property damage to others — is already included in the rental price. The bad news is that the limits are low, so you may want to purchase supplementary liability insurance as well. Having the Rental Car Damage Protector is crucial to protect you from the costs of loss or damage to your rental vehicle, no matter who or what caused the damage.

A third component of Mexican rental car insurance is personal accident insurance, which can pay medical expenses for you and/or your passengers, if you’re injured in a car crash. If you and your travel companions have travel insurance with emergency medical and dental benefits, however, you’re already protected against losses due to covered medical and dental emergencies that occur during your trip.

Do be aware that the U.S. State Department urges caution when driving in Mexico, and advises American travelers to use toll (“cuota”) roads instead of the less secure free (“libre”) roads.ix Safe travels!

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Aug 21, 2018