Rental Car Insurance: Everything You Need to Know

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Rental car companies love to sell you extra insurance that you don’t necessarily need. 

As a result, you could end up paying $75 or more for coverage that’s already provided by your regular auto insurance, your renter’s insurance, or even your credit card benefits. 

But sometimes, the opposite happens and folks will confidently decline rental car insurance only to realize that their existing policies and benefits left some pretty serious gaps. 

Here’s how to know what’s already covered and what you need to buy at the counter. 

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How Rental Car Insurance Works

In some ways, rental car insurance is even more complex than regular car insurance. 

There’s a whole new suite of terms to understand, and my inner cynic thinks the rental car companies made it complicated on purpose so you’d go ¯\_(ツ)_/¯ and buy something you don’t really need. 

To prevent you from falling into this trap, let’s break down the types of rental car insurance — including what you need and what you might already have. 

The four types of rental car insurance

When you hit the Hertz rental counter, they’ll typically try to sell you up to four additional types of insurance.  

What they might not tell you is that some of this stuff might already be covered under your regular auto policy, your homeowner’s or renter’s insurance, or even your rewards credit card. You definitely don’t need to buy it twice.  

@erikakullberg how car rental companies try to take extra money from you #personalfinance #moneytok #money ♬ original sound – Money Lawyer Erika

Here are the four main types of supplemental insurance they’ll try to sell you: 

• Collision damage waiver, also known as a loss-and-damage waiver (LDW). This covers the cost of repairing or replacing your rental car if it's stolen or damaged (e.g., accident, fire, weather, vandalism, etc.). 
• Supplemental liability insurance covers the other driver’s repair bills and medical bills if you cause an accident in your rental car. 
• Personal accident insurance covers the cost of an ambulance, medical care, and/or death benefits for you and your passengers after an accident in the rental car. 
• Personal effects coverage covers the cost of replacing any of your stuff that’s stolen from the rental car, up to a certain dollar limit. 

Now, if some of those sound suspiciously familiar, it’s because they’re more or less existing forms of insurance that the rental car companies repackage and sell under a different label.

What types of rental car insurance do you (possibly) already have? 

Rental car insurance can be confusing, so here’s a chart to help you decipher what each of the four types equates to in the real world — and which ones you might already have. 

This form of rental car insurance…	Is the equivalent of this type of regular insurance…	That might already be covered by your…
Collision damage waiver	Collision and comprehensive auto insurance	Auto insurance policy; Rewards credit card
Supplemental liability insurance	Liability auto insurance	Auto insurance policy (rental car agencies typically cover state minimums)
Personal accident insurance	Health insurance and life insurance	Auto insurance policy (via PIP); Health and/or life insurance policy; Travel insurance (when outside the U.S.)
Personal effects coverage	Homeowner’s or renter’s insurance	Homeowner’s or renter’s insurance policy

In other words, it’s entirely possible that you already have all four forms of rental car insurance that an agent will try to sell you at the counter, so there’s no need to plunk down any more of your hard-earned cash for redundant coverage. 

That said, maybe you have some of the insurance listed in column three but not all of it — and you want to be sure you have your bases covered before setting off in your rental car. When would it make sense to buy extra insurance from the rental car counter? 

When Do You Need to Buy Rental Car Insurance? 

Here are six common cases where you might want to consider purchasing additional insurance for your rental car. This could be through an auto insurance company, a medical insurance company, or the rental car agency itself.

1. You’re renting a car in California 

By law, rental car companies in 49 states must provide you with at least the state minimum liability insurance with your rental car. 

But if you rent a car in Cali, you’ll need to have your own liability insurance. You can purchase a temporary policy through the rental car agency or directly from an insurance provider. 

2. You want better liability protection

If you don’t already have your own liability insurance, don’t count on the “free” liability insurance from your rental agreement to protect you. There have been cases where the rental agency covers the liability and then sues the renter to recoup their costs (see Subrogation Div. Inc. v. Brown).

In addition, you might be renting in a state with extremely low state minimum liability limits. Louisiana, for example, only requires drivers to carry $15,000 in bodily injury liability coverage. For comparison, a standard Hertz supplemental liability policy covers up to $1,000,000. 

3. You have no collision or comprehensive coverage  

If you don’t already have collision and comprehensive coverage on your standard auto insurance policy, check your credit card benefits. Lots of credit cards provide a collision damage waiver for rental cars booked using that card.

If not, you might want to consider purchasing outside collision/comprehensive or a collision damage waiver at the rental desk so you’re not personally liable for a tree falling on the car.  

4. You’re transporting valuable stuff 

If you’re traveling out of state, you might not be aware of which neighborhoods have high rates of car theft. So if you don’t already have your stuff covered under a homeowner’s or renter’s insurance policy, some personal effects coverage might be a good investment. 

5. You want to avoid raising your auto insurance premiums 

If you file a liability or collision claim to your temporary rental insurance, your regular auto insurance will be none the wiser and won’t raise your premiums. 

6. You’re renting a car in a no-fault state 

In a no-fault state, accident victims file claims to their own insurance — not the at-fault driver’s insurance. 

So, if you’re traveling to Florida, Hawaii, Kansas, Kentucky, Massachusetts, Michigan, Minnesota, New Jersey, New York, North Dakota, Pennsylvania, Utah, or Puerto Rico, you might want personal accident insurance or personal injury protection (PIP) with your rental. 

Primary vs. Secondary Rental Car Insurance

You may have heard of primary and secondary rental car insurance. 

In a nutshell, primary insurance is the one you file a claim to first. If that provider doesn’t cover 100% of the cost, you can file a claim to your secondary insurance to see if they’ll cover the rest. 

Let’s say you have an auto insurance policy with one provider that includes collision coverage of up to $50,000 with a $500 deductible. In addition, your credit card offers free collision damage waivers for rental cars — but your card issuer makes it very clear that the waiver is secondary to any form of insurance you already have. 

A week later, you’re driving your rental car in the snow and you accidentally slide into a wall. The front is banged up pretty bad, so you let your rental car company know and they tow it away. Soon, they send you a bill for $3,000. 

Step one is to file a claim with your primary insurance provider. They pay $3,000 minus your deductible of $500 — or $2,500 total. 

That means you still owe $500, so you file a claim with your secondary insurance provider for the remaining $500. Your card issuer is going to ask if you’ve filed a claim with your primary provider. Once you show them the paperwork that you have, they’ll reimburse you for the remaining $500. 

In that same scenario, if you had no coverage, your credit card would become your primary insurance. In the insurance world, “secondary” really just means, “Secondary to any other insurance you already have — but if you have none, that’s cool, too.” 

READ MORE: Credit Card Rental Car Insurance: What You Need to Know

Which Credit Cards Have Rental Car Insurance? 

Here’s a brief sampling of credit cards that offer rental car insurance. 

As expected, they’re mostly travel-centric rewards cards with annual fees attached, but there are some exceptions with no annual fee. 

• Chase Sapphire Preferred® Card
• Chase Sapphire Reserve®
• Chase Freedom Flex® (no annual fee)
• United Club℠ Infinite Card
• Capital One Venture Rewards Credit Card
• The Platinum Card® from American Express*
• American Express® Gold Card*
• Blue Cash Everyday® Card from American Express* (no annual fee)

Since card benefits can change, be sure to check the full details on the card’s page before applying. 

How To Make Sure Your Rental Car Is Covered

Here are three critical steps to follow to ensure you don’t leave any gaps in your rental car coverage: 

1. Know what your existing insurance policies cover. Check the chart above and your existing auto/renter’s/life insurance policies. Or you can simply call up your insurance provider(s) and ask what your policy covers versus what you need.
   
2. Decline the rental car agency’s coverage. Some rental car agencies may add a collision damage waiver to your booking by default and resist your attempts to remove it. If that happens, just politely but firmly let them know that you’re already covered.
   
3. Pay with a card that offers free coverage as a benefit. Lastly, be sure that you book the rental using a card that has a free collision damage waiver attached. The wrong card from the right bank won’t count!

It’s worth spending 20 minutes reviewing your existing policies and chatting with your providers to find potential gaps in your rental car coverage. 

It can save you from spending money on insurance you don’t need, or fill a gap and save you thousands in liability after an accident.

READ MORE: Here’s the Best Way to Shop for Car Insurance

TL;DR

Rental car insurance is way more complicated than it has any right to be. But now that you’re an expert, you can choose the right types of insurance for yourself, maximize your existing coverage, and help your friends out, too.

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* Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by Amex Assurance Company.

Disclosure: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.