Nov 14, 2016
mountains
Travel Resources

The Four Types of Rental Car Insurance, Explained

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.[1] 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 and loss damage waiver offered by the rental car company is not really insurance.[2] Rather, it means that you're off the hook for paying for rental car damage or theft.

Do You Need a Collision Damage Waiver?

This is the one type of rental car insurance that's wise to purchase. While your regular car insurance policy probably includes collision coverage for rental cars, it 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).[3] 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 collision loss/damage insurance coverage up to $40,000 for just $9 per day.

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 injuries you're responsible for.[4] Every state requires a minimum amount of liability insurance on car insurance policies, so if you're already insured, you're covered.

Do You Need Supplemental Liability Insurance?

Someone trying to sell you rental car insurance may say your liability coverage is too low and push 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) liability insurance that provides extra protection while driving your car or a rental.[5]

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 are already included in your health, life or car insurance policies — or they're included in the coverage the car rental company's required to provide by law.

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?

If you have a homeowners or renters insurance policy, you're most likely already covered for loss of personal items stolen from your car.[6] Check your policy documents to be sure. If you typically travel with expensive jewelry, electronics, musical instruments or sports equipment, the Insurance Information Institute suggests protecting these items with a personal articles floater under your homeowners or renters insurance policy.[7]

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.[8]