If you rent a car, do you need car rental insurance?
Ask a car rental company, and it will tell you that you do. But ask an insurance expert, and the answer gets downgraded to a “maybe.”
In general, a personal auto insurance policy extends to rental cars with the same coverage limits. But check with your insurance agent to verify the coverage you’ll have for a rental.
“It’s important to understand that not all personal auto insurance policies cover you when renting,” says Jonathan Weinberg, cofounder of the car rental website AutoSlash. “Many do, but it’s important to verify your rental coverage with your insurance agent or carrier ahead of time.”
When you rent a car, you’re assuming responsibility for an expensive vehicle. For example, a Ford Fusion, one of the full-size cars in Enterprise’s fleet, will set you back $23,170. The GMC Yukon in Hertz’s fleet costs $50,600.
Car rental companies have fleet insurance for their vehicles, but it doesn’t cover the cars and trucks when they’re rented. And when you rent a car, you sign a form accepting responsibility for the vehicle. That means, whatever happens, is on you — or your insurance.
If you’re not covered, and you total the car, a rental company will hand you a bill for $23,170 for the Fusion. Or $50,600 for the Yukon.
What is covered by your auto insurance?
There are three main coverage types that can extend to rentals from your personal auto insurance policy:
1. Liability insurance
Car liability coverage pays for repairs if you damage someone else’s car or property. It also pays others if you cause injuries in an accident.
Collision insurance coverage pays for repairs to your rental car if it’s damaged. This type of coverage pays out even if you’re responsible for the accident. It also has a deductible, which is the amount subtracted from an insurance claims payment.
This type of coverage pays to repair your rental car if it’s damaged by fire, vandalism, flood, or natural disasters. It also covers vehicle theft. Your comprehensive coverage’s deductible will apply.
But is it enough?
“It depends,” says Zhaneta Gechev, a former manager at a major auto insurance company and founder of One Stop Life Insurance, an insurance site. “Most companies — and everyone needs to confirm with his or her agent — will extend coverage to any vehicle you rent for personal use. In other words, the coverage you have on your auto insurance will apply to a rented car. However, there are a couple of things to be mindful of.”
Watch out for the exclusions
Rentals of trucks, vans and luxury cars may not be covered under your personal auto insurance policy. And if you rent for more than a month, your auto insurance policy may stop applying.
If you damage a rental car and it’s in the repair shop, your car rental company may charge a daily “loss of use” fee.
“The issue that can come up is that personal auto insurance policies don’t cover the loss of income that a rental car company may try to charge you while the car is being repaired,” says Jeff Zander, CEO of Zander Insurance, an insurance agency. “If a repair costs $10,000 but takes 18 days, they can try and charge you for the income they lost on those 18 days, and insurance companies will not reimburse for those charges.”
Your US auto insurance may not work outside the country
The coverage on your auto policy is unlikely to work outside the country for a rental car.
“Rental coverage generally only applies when you’re renting in the U.S.,” says Weinberg of AutoSlash. Note that some countries, like Ireland and Jamaica, require that you purchase car rental insurance. If that’s the case, the insurance costs should be included in the price of your rental vehicle. Auto Europe publishes a full list of country-specific insurance requirements.
Claims have consequences
If you file an insurance claim from your own policy, experts warn of a few other issues. You’ll have to pay the deductible if you’re making a collision or comprehensive insurance claim. After that, there’s a chance your car insurance rates will go up. That’s why a lot of travelers prefer to lean on their credit card coverage when they file a claim — so the claim stays off their insurance record.
Another way to keep your insurance record clean is to buy the rental agency’s collision damage waiver (known as the CDW).
The rental car agency’s insurance may be the best bet
Even if you think you’re covered, you might still want to get car rental insurance through your travel insurance policy or directly through the rental company, experts advise.
“The reality is that the majority of vehicle owners have little to no idea what exclusions their auto insurance contracts contain,” says Prosper Shaked, a trial attorney based in Miami. You might not know that your policy excludes coverage when you rent a vehicle. That’s why it’s important to double-check with your agent.
On the other hand, consumers frequently complain about the cost of car rental insurance. That’s a separate topic, but certainly one worth considering. Car rental companies train their frontline agents to sell insurance, which is highly profitable for the rental company but can easily double the cost of your rental. They’re also aware of the widespread confusion about what auto insurance does — and doesn’t — cover. For them, it’s the perfect condition under which to sell optional car rental insurance.
No matter what you decide to do, think about auto rental insurance before you travel so you don’t get ripped off at the rental car counter.
If you don’t, you could end up overpaying on expensive optional car rental insurance — and perhaps buying coverage that you already have.
Originally published in Forbes.
Christopher Elliott is the founder of Elliott Advocacy, a 501(c)(3) nonprofit organization that empowers consumers to solve their problems and helps those who can’t. He’s the author of numerous books on consumer advocacy and writes weekly columns for King Features Syndicate, USA Today, and the Washington Post. If you have a consumer problem you can’t solve, contact him directly through his advocacy website. You can also follow him on Twitter, Facebook, and LinkedIn, or sign up for his daily newsletter. Read more of Christopher’s articles here.