Do You Need Rental Car Insurance?

There are some questions I just know my company’s going to get every week. Sometimes I feel like we should have a dedicated phone line to answer them.

One of the most common questions I get is “Does my auto insurance policy cover a rental car?” My answer: It depends.

Your current auto insurance policy will extend to a rental car only for the coverage offered on the plan. If you have liability only, then you will have liability only on the rental car. You will not be covered for physical damage, and you might want to consider buying the insurance the rental company offers you.

If you carry full coverage on your policy, your rental car will also have liability and physical damage coverage. However, you will be subject to the deductible you carry on your existing auto insurance policy.

Extra Coverage: When You Need It and How to Get It

A client of ours was vacationing with a group of people on a tropical island, and they needed to rent a car. She was the one person who didn’t have physical damage coverage on her auto policy, but she was the one who rented the vehicle. During the trip, they had a minor fender bender (with no injuries). Unfortunately, she had turned down the additional coverage offered by the rental company. Her existing insurance coverage was insufficient to cover the damages to the vehicle, and they were forced to pay out of pocket.

Insurance exists to protect you from risk. If you’re not willing or able to pay the costs of having enough insurance to cover all damages, you should consider extra rental car coverage. Even if your auto insurance coverage does extend to your rental car, you’re still going to be responsible for filing a claim and paying your deductible. Extra coverage with the rental car company may be an extra cost, but it will save you extra hassle when you’re traveling.

You can also get extra rental car insurance through your major credit card or the bank issuing the credit card. Before you charge your rental car to your credit card, check with both the credit card and the issuing bank to confirm the coverage. Insurance benefits may vary between banks and card levels.

According to the Insurance Information Institute, credit cards usually cover only damage to or loss of the rented vehicle, not other cars, personal belongings, or the property of others. There may be no personal liability coverage for bodily injury or death claims. Some credit card companies will provide coverage for towing, but they might not provide for diminished value or administrative fees. And some credit card companies have changed their policies, so you may not have as much coverage as you thought.

If you know you’re going to be renting a vehicle, keep a copy of your insurance and credit card information handy, just in case. The rental company may want proof of your existing coverage if you elect not to purchase additional coverage for the rental car. Should anything happen when you’re driving the rental car, you will be prepared with proof of insurance.

Enjoy your vacation and enjoy the ride!

Linda Rey is a licensed insurance agent at Rey Insurance with a broad spectrum of expertise in life, accident, health, property and casualty insurance as well as retirement planning and college funding strategies.