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The Four Types of Rental Car Insurance, Explained

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Here it comes across the counter: the contract you have to sign to get your rental car. The salesperson is pushing you hard to buy rental car insurance as your pen hovers over the paper. Collision damage waiver? Personal accident insurance? Do you need all this stuff? What does it even mean?

Don't check any boxes yet! Whatever the salesperson might say, these coverages are optional — and if you get them all, they can add up to $30 per day to the rental bill.i You want to be protected, but there's no sense in paying extra for coverage you already have. We'll explain the different types of rental car insurance and tell you what you really need.

What's the Collision Damage Waiver?

The collision damage waiver or loss damage waiver offered by the rental car company means that if your rental car is damaged or stolen, you don’t have to pay to repair or replace it. These waivers typically include a deductible, however.

Do you need a collision damage waiver?

It’s wise to purchase this type of rental car insurance. While your regular car insurance policy may include collision coverage for rental cars, it most likely includes a deductible and may not pay for all the rental car company's charges, such as loss of use (charges for the money the company's losing while its car is in the shop).ii Your credit card may include free collision damage coverage, but credit card rental car insurance is typically secondary coverage, meaning any claims will go first to your auto insurance company.

The most affordable way to ensure adequate protection in case of collision or theft is with third-party rental car insurance. The Rental Car Damage Protector from Allianz Global Assistance provides affordable collision loss/damage insurance coverage up to $40,000.

Unlike the waivers rental car agencies sell, the Rental Car Damage Protector is actual insurance that can protect your rental car almost anywhere in the world.

What Is Supplemental Liability Insurance? 

Liability insurance typically covers damages to other people's property (e.g. their cars) as well as medical costs for other people’s injuries in an accident you're legally responsible for.iii In the U.S., every state requires a minimum amount of liability insurance on car insurance policies, so you may already have liability coverage through your personal auto insurance.

Do You Need Supplemental Liability Insurance? 

Someone trying to sell you rental car insurance may say your liability coverage is too low and encourage you to buy supplemental insurance. If you're worried about liability, there's a better way to protect yourself. The Insurance Institute of America suggests buying "umbrella liability insurance," a low-cost policy added to your auto and homeowners (or renters) insurance that can provide extra protection while driving your car or a rental.iv

U.S. auto insurance policies often don’t provide any coverage abroad, so you may want to — or you’ll be required to — purchase liability insurance when you’re traveling overseas.

What Is Personal Accident Insurance?

While liability coverage covers other people's property damage and injuries in an accident, personal accident coverage includes medical, ambulance and death benefits for you (the rental car driver) and your passengers.

Do You Need Personal Accident Insurance?

Probably not. According to Consumer Affairs, the benefits provided by personal accident insurance may already be included in your health, life or car insurance policies — or they may be included in the coverage the car rental company provides. If you’re traveling overseas, where U.S. health insurance may not be accepted, then you should carry travel insurance with emergency medical benefits and emergency transportation benefits. These benefits are broader than personal accident insurance, because they can cover your medical expenses in an emergency overseas, whether or not it was caused by a car accident.

What is Personal Effects Coverage?

Personal effects coverage covers the theft of possessions from the rental car, up to a set dollar limit.

Do You Need Personal Effects Coverage?

Probably not. If you have a homeowners or renters insurance policy, you may also be covered for loss of personal items stolen from your car.v Check your policy documents to be sure. And if you have travel insurance with baggage loss/damage benefits, you may be protected if your baggage is lost, damaged or stolen while you’re traveling.

If you’re a frequent traveler, an annual travel insurance plan may be your best bet to protect your rental car, your baggage and your finances. The AllTrips Premier Plan, for instance, includes the rental car collision damage waiver, $2,000 in baggage loss/damage benefits, and a slew of other travel insurance benefits that cover you for a 365-day period.

The easiest way to figure out what rental car insurance you need? Do your research before you're standing at the rental car counter. Check your car insurance coverage and your credit card coverage options. Buy low-cost collision loss/damage insurance ahead of time. And if you impulsively check "yes" on all the insurance options offered by the rental car company, don't let buyer's remorse ruin your vacation (and your budget). The company may let you cancel the coverage if you return to one of its offices the next day.vi

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Sep 03, 2018