When you rent a car, the rental company will inevitably ask if you want to add insurance coverage to your reservation. Before you reflexively decline or accept, it’s worth understanding what coverage you actually need and what you might already have.
What Rental Car Insurance Covers
Rental car companies typically offer several insurance options:
Collision Damage Waiver (CDW) covers damage to the rental vehicle from collisions, regardless of fault. Liability coverage protects you if you’re legally responsible for injuring someone or damaging their property. Personal Effects coverage reimburses you for belongings stolen from or damaged in the vehicle. Loss of Use fees cover the rental company’s lost revenue while the car is being repaired after an accident.
These are optional add-ons that can easily double your daily rental rate, so it’s critical to determine whether you actually need them.
What Your Existing Insurance Might Cover
Your personal auto insurance policy provides the most essential protection. Most comprehensive policies extend collision and liability coverage to rental vehicles at no additional cost, whether you’re renting in your home state or traveling across the country. Depending on your policy terms, this coverage typically follows you automatically.
Check your insurance declarations page or contact your insurance agent to confirm what your policy covers for rentals. Specifically ask about deductibles and any limitations on rental vehicle coverage, as these details matter significantly if you need to file a claim.
Credit Card Coverage
Many premium credit cards include rental car damage protection when you use that card to pay for the entire rental. Platinum-level Visa or Mastercard cards often offer this benefit, though coverage varies widely. Some cards cover collision and comprehensive damage with no deductible, while others reimburse only after your personal insurance pays. A few cards provide primary coverage, meaning they pay first before your personal insurance is involved.
The catch: credit card coverage only applies if you decline the rental company’s insurance. Accepting their coverage typically voids your card’s protection. Also, coverage limits and conditions vary, so review your card’s benefits guide before traveling.
When You Should Buy Rental Insurance
Despite your existing coverage, there are situations where purchasing the rental company’s insurance makes sense. If you don’t have personal auto insurance, buying coverage from the rental company is essential. If your personal policy has a high deductible (say, $1,000 or more) and you’re concerned about accident expenses, the rental company’s coverage might be worth the cost.
You should also consider purchasing rental insurance if you’re renting in a foreign country where your U.S. auto insurance may not be valid. Some countries have specific liability requirements, and rental insurance can help you meet the minimums.
If you’re renting an expensive vehicle, like a luxury car, or in an unfamiliar location where accidents are more likely, coverage can provide peace of mind that’s worth the cost.
Steps to Take Before You Rent
Review your auto insurance policy and understand what coverage applies to rentals. Contact your insurance company if anything is unclear. Check your credit card benefits to see if rental coverage is included, and verify the exact terms and conditions. Take photos of the rental vehicle before leaving the lot, documenting all existing damage. Create a written record of the vehicle’s condition by having the rental agent note any scratches, dents, or mechanical issues on your rental agreement.
These simple steps prevent disputes later and ensure you’re not charged for pre-existing damage.
The Bottom Line
For most people with active auto insurance and a decent credit card, purchasing additional rental car insurance is unnecessary and wasteful. However, it’s not a one-size-fits-all decision. Your decision should depend on your personal coverage, deductible amounts, the value of the rental vehicle, and your comfort level with financial risk.
Take five minutes to review your coverage before renting. It’s far less time than you’ll waste dealing with a billing dispute later, and you’ll either save money or confidently know you made the right choice to purchase coverage. The rental company wants you to buy insurance regardless of your actual need, so don’t let their sales pitch decide for you.