Does Your Auto Insurance Cover A Rental Car?

Renting a car can, at times, be expensive. In the United States, a rental car costs around $50 to $80 per day, or about $500 per week, including fees and taxes. However, rental car prices vary by vehicle class and amenities, where you are renting, the time of year, and when you book.

While prices have gradually been reducing, adding rental car insurance at the checkout counter can be another expense, and you might not need it. Your personal car insurance policy might cover all the coverage you need.

However, you will need to buy coverage from the car rental company or use a credit card that offers it if you don't have insurance for your own vehicle through a personal policy. Here is everything you need to know to ensure you are covered when you drive off the car rental lot.

What is rental car insurance?

Rental car insurance refers to the coverage a company offers when you rent a vehicle. It provides financial protection for accidents, theft, damage, or other costs that might arise while renting a car. However, depending on the personal insurance and coverage offered by your insurer, you might not need additional coverage offered by the rental car company.

Does your car insurance cover rental cars?

The simple answer is yes. Your car insurance policy will usually offer enough protection when driving a rental vehicle. You might not need extra coverage if your insurance policy includes comprehensive, collision, liability, and personal injury protection (PIP) or medical payments (MedPay) coverage.

However, there are times when certain exclusions might apply, and you could have gaps in coverage that would require an additional policy. Therefore, make sure to review your coverage before you rent a car. Furthermore, speak with your insurance company or agent to learn what your auto insurance policy will cover on a rental vehicle.

If you want to avoid purchasing additional insurance for the rental vehicle, examine your existing policy and ensure it includes the following types of coverage.

• Collision and comprehensive coverage: These two types of coverage pay for the damage to your vehicle. Collision insurance offers coverage if your car has suffered damage in an accident with another vehicle or object. On the other hand, comprehensive insurance pays in case of other damage or theft. Most lenders require that you have these two types of insurance in your policy if you have an auto loan on your car.
• Liability coverage: This coverage pays for personal injuries or others' property damage when you are at fault in an accident. Liability insurance is required by law, meaning you will most likely have this coverage.
• Medical payments (MedPay) and Personal injury protection (PIP): These types of coverage pay for your medical expenses and those of your passengers. They also pay for losses incurred due to the accident, including lost wages, child care, funeral expenses, and more. Unlike liability insurance, this coverage can chip in no matter who is at fault. MedPay and PIP are mandatory in some states.

All these types of coverage in your auto insurance policy can apply to a rental vehicle. Therefore, consider them the bare minimum required for you to responsibly decline the rental car insurance.

Besides your car insurance, certain credit cards offer additional coverage when you pay for a car rental using your card. Therefore, if you have extra rental car insurance through a credit card insurer, call the toll-free number at the back of your card and have them explain your options in detail before you reserve your vehicle.

When should you get rental car insurance?

Rental car insurance might not be worthwhile if you already have auto insurance or rental car coverage through a credit card. However, there are a few instances where adding rental car insurance to your policy could be beneficial and worth it. These instances include:

• You have inadequate or no auto insurance: If you don't have auto insurance or have very high deductibles, it's a good idea to get rental car insurance. Rental vehicle insurance coverage usually has no or low deductibles, meaning you might pay less or nothing out of pocket on a claim.
• You are traveling abroad: Most US car policies only offer coverage in the United States and Canada. Therefore, rental insurance can be beneficial if you are planning to travel to a country where your auto policy doesn't provide coverage. While you might get protection from your credit card company, ensure the country you are visiting is included.
• You are using the rental vehicle for business purposes: Your auto insurance policy will likely not cover the rental car if you use it primarily for business.
• You are concerned about a rental car accident affecting your insurance rates: When you file a claim, your car insurance premiums will likely increase. However, you won't have to worry about this when you purchase insurance from your rental car company.

Different rental car insurance options

Car rental companies usually sell their own coverage. Here are the most common types of rental car insurance.

Loss damage waiver (LDW)/collision damage waiver (CDW)

Loss damage waiver is similar to collision or comprehensive coverage. It waives your financial responsibility for any loss or damage incurred to the rental car. Some policies also cover administrative and towing fees.

However, there tend to be limits. For instance, LDW or CDW might not apply if you are driving under the influence, on unpaved roads, or speeding.

Liability coverage

Liability coverage pays for your legal fees in case you cause an accident while driving a rental car. By law, car rental agencies must provide the minimum level of liability coverage to meet their state's requirements.

While your auto insurance policy might be enough, you might want to purchase supplemental liability insurance if you don't have your own policy. Supplemental liability protection covers property damage or injuries you caused behind the wheel. For instance, if you hit someone else's car, SLP might help cover damage to that vehicle.

Personal accident insurance (PAI)

Like medical payments or personal injury protection, personal accident insurance covers medical expenses if you or any of your passengers are injured in an accident while driving a rental car. This coverage applies regardless of who is at fault.

Personal effects protection (PEP)

Personal effects protection, or PEP, pays for personal belongings, such as your laptop or phone, if stolen from your rental car. While this might be covered by your homeowner's or renter's insurance, you will have to pay the insurance deductible when you file an insurance claim.

How to purchase rental car insurance

Buying additional car insurance might not make financial sense if you already have the necessary coverage. However, it's worth it if you only have fundamental liability. Here are a few tips on how to get the best deal for your rental car insurance.

Research and compare multiple insurance companies

It's always imperative to shop around and compare different car insurance quotes before committing to an insurance provider. Don't compare only prices and discounts, but also protection. In addition, select the same coverages for each quote for a more accurate comparison.

Read and understand policy terms and conditions

Regardless of the insurance policy, whether homeowners, renters, or auto, it's essential to understand what you are covered for and not covered for. That way, you can always update your coverage or know whether you qualify for a discount you overlooked. Most insurance providers even allow you to do this online.

Conclusion

Car rental insurance provides financial protection when you are driving a rental vehicle. However, you don't have to buy insurance through your rental car company. Check your auto insurance policy to see whether it can cover the car you want to rent.

Your homeowner's or renter's insurance might also cover your personal items if stolen from the rental car. Either way, it's good to contact your insurance company or agent ahead of time and make changes to your policy if it's worth it.