Should You Buy Insurance on Your Rental?


When you’re standing at the rental car counter, you will be faced with an important question-should you pay extra to purchase the rental company’s insurance and waivers or should you save your money?

Before you make the decision, you need to understand what coverage you may already have for rental cars. Your personal auto insurance coverage, limits and deductibles extend to some of the damages incurred in some of the vehicles you rent but it may not cover all the damages the rental company holds you liable for after an insurable incident. Fully or partially uncovered expenses include:

  • Loss of Use: While your rental car is off the road and in the shop, the rental company could be losing money. If they can prove a loss through a fleet utilization log indicating that no other cars were available to rent in place of that vehicle, your insurer may cover some of the related financial damage, but they may not cover the entire amount which will make you personally responsible for the remainder if you waive the rental company’s coverage.
  • Diminution of Value: An accident can reduce the value of a vehicle when it shows up on the vehicle’s Carfax history report. This lost value can be passed on to you and while your insurer may pay the portion of damages they find reasonable, it could leave you exposed to paying the remaining amount if you’ve refused the coverage offered by your rental company.
  • Administrative fees: Additional time and manpower goes into working with you and your insurance company on claims. This additional expense is passed on to you through administrative fees that are not generally paid by your insurance company. Normally, these fees are waived if you’ve purchased coverage through the rental car agency.
  • It’s also important to note that rentals for business purposes, long-term rentals and international rentals may be excluded from your personal coverage so be sure to call your agent to get the details of your policy before you assume it will cover you.

Another source of coverage you may have is through the credit card you use to pay for the rental. Generally, credit cards offer the repair or replacement of a rented vehicle that was damaged or stolen. They may not, however, cover the fees for loss of use, diminution of value or administrative fees and they may exclude certain vehicles and rental periods. For details, call the credit card company you plan to use to pay for the rental.

What Rental Insurance and Waivers Cover

The rental company will likely present you with several options for rental insurance to replace or supplement coverage in your personal policy. Examples of rental insurance options include:

  • Collision Damage Waiver – This is basically a hold harmless for damage you unintentionally cause to the rental car. It’s not really insurance but it does mean that the rental company won’t come after you for damages. If looking for a coverage equivalent in your personal property, look to your collision and comprehensive coverage limits and deductible.
  • Theft Liability Waiver – If the rental car is stolen on your watch, as long as you took reasonable measures to protect it, the theft liability waiver holds you harmless. In personal insurance, this would be covered within the comprehensive limits and deductible.
  • Personal Accident Insurance – Covers accidental death and medical expenses for the driver of the rental car (as long as he/she is the renter) and passengers. In your personal policy, these expenses may be covered in your personal accident or traditional health insurance, with the associated limits and deductibles.
  • Liability Insurance: Should you injure another during an insurable incident, your rental car’s liability coverage will pay damages. In your personal policy, this falls under bodily injury or personal property damage liability.
  • Personal Effects Coverage: Your home insurance policy may cover personal effects that were lost or damaged in a rental car. Or, you can purchase the rental company’s personal effects coverage.

Reimbursement and Getting Benefits

Filing an insurance claim with your car insurance company could be relatively easy. In a rental situation, you would file your claim the same way you would if you had the incident while driving your own car.

When you use a credit card’s car rental coverage, you may have a specific time limit during which you can submit the claim and you may also need to pay upfront and simply be reimbursed by your credit card company.

The Benefits of Avoiding Rental Insurance

Now that you understand what your options are, let’s take a look at some of the benefits of NOT taking out rental car insurance.

  • Save money on the rental: Some rental insurance programs can end up doubling the cost of the rental. When you’re renting a car in order to save money or have a limited vacation budget, it may not be feasible to effectively double your expenses.
  • Fewer feelings of waste: People love having paid for insurance coverage when they have a claim, but the majority of renters who buy rental car insurance won’t even use it, leaving them feeling as though they wasted money after the rental period is over. Of course, the protection offered by insurance is never a waste, but if you already have coverage and buy extra which goes unused, you still may feel that way.

The Benefits of Having Rental Insurance

Naturally, there are some good points to buying rental insurance, including:

  • No deductible: If you have a high deductible auto insurance policy, you may want to invest in car rental insurance so that you avoid paying that deductible on a vacation related accident. After all, your auto deductible is per-incident, not per year.
  • No increase in premiums: A history of claims can drive your insurance rates up as you present a higher risk to the insurance company. When you have rental car insurance you avoid putting any claims through your insurer.

If you are confused about whether rental car insurance is a good idea for you and how your personal auto policy fits into the picture, give us a call and we can meet with you to give you a better understanding of all the factors you should consider.

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