Do You Need Insurance for Rental Cars?

Rental CarsBy Johnny Jet and Keir Jones

Let’s face it…talking about insurance is boring — the word alone makes me want to yawn. But it’s obviously important, and taking four minutes to read this post could save you big time.

I recently called my new cousin (by marriage), Keir, to see if he could lower my car insurance payments. Sure enough, he could — and he was able to help me a whole lot more. After receiving my then-car insurance details, Keir informed me that I wasn’t even covered for car rentals. Gulp! I was shocked, and after all the valuable information he gave me, I asked if he would be kind enough to write a quick post to help readers of JohnnyJet.com learn how, as I did, to be able to confidently turn down all of those pesky car rental salesman at the airport counters.

Unfortunately, Keir can’t help everyone with their insurance needs — only those in the great state of California — but all travelers will find his info below very helpful.

Keir, take it away…

When renting a car, you will be asked if you want to purchase insurance coverage. The rental agent will normally offer you different levels of insurance coverage, including a Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW), which (by either name) covers the rental vehicle in the event of accidental damage or theft. Many drivers become confused at this point, wondering if they need this insurance.

If you frequently rent cars you may want to consider adding Use of Non-Owned Cars (UNOC) coverage to your existing auto policy. Use of Non-Owned Cars coverage provides liability coverage to help to pay reasonable loss of use charges (see below) and administrative charges, and may be endorsed to provide additional physical damage coverage for non-owned cars if your policy does not include comprehensive and collision coverage.

A conversation with your insurance agent is recommended before you decide what to get with your rental, but here are some guidelines from the State Farm Learning Center to help you:

Situation What to look for When to consider additional coverage
You have a personal auto policy Read your policies carefully or call your insurance agent to ask for details of coverage. Many auto policies cover rentals with the same type and amount of coverage on your personal vehicle. Also ask about coverage for any administrative fees you may be responsible for, such as loss of use (rental income not earned on a car while it is in the repair shop). If your policy does not cover rentals, has a high deductible, or does not include collision coverage or sufficient comprehensive coverage, you may wish to purchase additional coverage from the rental company. Also, insurance is invaluable in foreign countries where you may be responsible for paying for the damage in full before you leave the country.
Your credit card offers rental car insurance Carefully read the documentation that came with your specific credit card and understand the extent of the coverage it provides. Depending on the level of coverage your credit card provides, you might consider adding coverage from the renting agency.
You are traveling on business Your employer may provide corporate insurance for rented vehicles. Be sure to know the applicable corporate policies and procedures before you rent a car for business.
You do not own a car If you do not own a car and therefore do not carry auto insurance, you will need to purchase insurance from the rental agency. Take your time at the rental counter to consider the coverage packages being offered. You may not need the most expensive plan being offered.
You are renting a car in a foreign country Check your auto insurance policy for possible exclusions or limitations on renting a car abroad. Also check for coverage that may be offered by your credit card company. If you are not sufficiently covered, you may wish to purchase third-party travel insurance to cover your foreign rental, or the Loss Damage Waiver from the agency. You will still be liable for any costs resulting from vehicle damage that are not covered by the waiver.


Editor’s Note:
Most American ExpressDiscoverMasterCard and Visa credit cards will provide you with rental car insurance above and beyond what your primary insurer and rental company will offer. It’s always a good idea to rent a car using one of these cards. Just be sure to read the fine print or call your credit card company to see if you are covered. FYI: I usually use my American Express Platinum card when renting a car since I know I’m completely covered with it and the extra auto insurance I received from Keir.

About Keir Jones
Keir Jones is a State Farm Agent, #0H27745, based in the Los Angeles area. An insurance agent by trade, Keir enjoys traveling and culinary adventures. Follow him on Twitter, visit his website at KeirJones.com or check out his Facebook page. Or call him toll-free at 877-734-1313 and tell him Johnny Jet referred you!

Comments

  1. A related travel story. I am driving my parents around Oregon in a few days and they are renting the car. I assumed that I would be covered under their policy for any damage to the car. I do not carry collision on my current car since it has a lot of miles.

    It turns out that I am not covered under my parents policy since I am not part of their household.

    So, I got UNOC added to my coverage. It was $30 extra.

    On a side note, I drove them around Norway for 8 days in a brand new rental 5 years ago. Makes me wonder what would have happened had I scratched it.

  2. American Express has a program that for a fee of $29.95 for each rental they will be primary coverage. This is good for people who do not own a car.

  3. We go through this issue every time we make a trip to Mexico. Through collusion between the rental car companies, most will not accept credit card insurances and that includes policies such as American Express Premium Rental Car Insurance. Additionally, no amount of add on insurance from US car insurance policies is recognized in Mexico. If one insists on using some form of credit card insurance, the agencies will get you by insisting on a deposit that may be up to the total value of the vehicle being rented. In over 12 years of traveling to Mexico, we have only experienced ONE company willing to circumvent these policies and they are no longer in business in the city we normally fly into.

    • Do you know if you would be covered regardless if you use an Amex card with the coverage. I don’t mind paying the basic coverage but I had to add on the extend coverage.

      • Talk to the local car company when you do the rental. If necessary take the car rental policy coverage part of your cc with you or have them call the cc company on the spot to verify. In some countries, I just buy the local coverage as its easier and sometimes cheaper if they don’t honor the coverage by my cc.

  4. When I was involved in a rental car accident several years ago, my State Farm agent advised that the rental car company would need to show that all of their vehicles were rented out for the entire time claimed for loss of use. Te rental company dropped their claim.

  5. Anonymous says:

    All good advice. . If you have an car insurance agent call and ask them if you are covered, or not. Then call your CC company to review their benefits. You won’t be covered for LOSS OF USE ON THE RENTAL CAR by your car insurance but (probably) will be by the CC company. Loss of use is the number of days the rental car is out of service. This is an option by the rental car company.

  6. Johnny and Keir,
    While I always appreciate Johnny’s column, I think this piece on rental car insurance is actually one of the most widely applicable, valuable articles that you’ve put up. Of course we all think we know all of this but it’s extremely practical. I hope you’ll link to it permanently in your Travel Portal or whatever appropriate area.

  7. Recently when renting a car in Italy the rental agent was pressing us hard to buy their insurance coverage, which prompted me to call American Express to make sure that I was covered. I was told that American Express does not have an agreement to cover 4 countries, one of which is Italy. I called Visa to see if their insurance supplement covered Italy and they also said that their agreement does not cover 4 countries, but that Italy was not on the excluded list.

    In my experience, European car rental companies seem to have a more granular definition on what they consider “damage”, so make sure that the smallest defect in your rental car is recorded.

    • Whenever I rent a car in a foreign country, I take photos of any little scratch or anything I see on the car, and make sure the photo has a date stamp o nit.. That way I have proof that I did not cause the damage.

  8. Jerry Mandel says:

    AA offers primary insurance for $9 per day. Good for people who don’t have an AMEX card.

  9. Anonymous says:

    Johnny,
    Can you or Keir let us know what exactly is covered by simply having a Platium Amex if you don’t own a car. I am a travel and wine writer and rent them frequently. Thanks, Liza Z

    • Johnny Jet Johnny Jet says:

      You might want to ask AMEX that. If you can you please let me know. I’m in Europe this week and don’t have a lot of internet time

    • Johnny Jet Johnny Jet says:

      I think it would be best if you called AMEX. If they don’t give you an answer I will ask Keir. Please please us know. FYI: I’m in Europe this week and don’t have a lot of internet time

      • With respect tocoverage in Mexico, I have had extensive discussions with AMEX. Mexico isn’t one of the four excluded countries but it was explained to me that AMEX Merchant Agreements are different in Mexico and they do not have to agree to all of the normal AMEX terms and conditions. Even though we pay Alamo $35/day for insurance coverage, we still pay the $24.95 per rental period since their coverage exceeds the agency limits.

        One further complication is that one can be taken straight to jail in Mexico if you do not have “Legal Assistance Coverage” and there is no such provision of credit card policies. At least with local insurance, an adjuster will be sent to the accident scene and keep you out of jail

        While this aspect continues to be a “thorn in our sides”, we are unwilling to give up the experience of driving around a wonderful, beautiful and educational country.

  10. What happens to your credit card insurance when you go through a third party company like Hotwire. You used your credit card to pay Hotwire, but does it provide any coverage when you are driving a Hertz, or any other brand, rental car? The credit card is not paying the car rental company directly!

    • Johnny Jet Johnny Jet says:

      Good question! I will ask Keir to comment.

    • John:

      When renting through a third party such as Hotwire, some do offer insurance coverage and others do not. I have been told and read numerous stories of renters either paying for coverage only to be turned down upon arrival in Mexico or receiving a large surprise upon arrival when told of the added costs for insurance.

    • Consult your specific credit card company program, most require that you are using the card directly with the rental car company, not with a third party.

  11. For foreign travel I have often used and can highly recommend the great foks at The Trip Insurance Store (www.tripinsurancestore.com). They offter a variety of services from different insurers. The product range includes car insurance coverage for foreign travel, trip cancellation coverage including “cancel for no reason” coverage, medical coverage that even includes medivac evacuation in event you experience some horrible health issue. I’ve used them for trip to South Ameria, southeast Asia and Europe. Great service every time, and super reasonable rates.

  12. We may all be ignoring the “reality” that rental car agencies (generally independent franchises) in foreign countries get to make the rules and what we think or believe in the US has little bearing in the matter. Americans and to a somewhat lesser degree, Canadians tend to believe that rules and regulations are for our benefit and we can count on them to back us up. On the other hand, similar rules and regulations in some foreign countries are merely suggestions or recommendations!

  13. H Poole says:
  14. H Poole says:

    Meant to add…. Rental Companies may attempt to charge you for Diminished Value if you have wrecked their rental car. Typically, your regular auto insurance will not cover this according to my insurance agent.

  15. Good article.
    I use American Express, so I well taken care of. And yes,I’ve made a claim before as I damaged a mirror in a parking garage. I ALWAYS take the full insurance for international situations. You always have to ask what is covered as sometimes the insurance they give you does not cover all situations.

    When in doubt just ask and if traveling international cover yourself fully and check if your credit card covers that country. FYI. Amex does not cover the “I”s; Italy, maybe Israel, Ireland plus Australia, Jamaica and Japan.

  16. Oh, one thing too is to be careful with border crossings. You have to tell the companies you are doing this. Sometimes you cannot take the car across the border. This is true for some U.S. states as well. Just have a talk with the car rental companies.

  17. Kathy Forred says:

    Generally (YMMV), your CC coverage is better than what is offered by the rental agency. Whatever you choose, just remember you can only have one or the other. CC will not pay a penny if you don’t decline the agency’s insurances.

  18. Meghanb904 says:

    Do authorized users on credit cards benefit from the same insurance coverage as the primary?

  19. This is a real minefield and crops up regularly as a major source of confusion for renters. A little research really helps a lots (such as reading an article like yours) and working out exactly what you need to be covered – Buying excess insurance independently is a great way to go particularly from a financial point of view. Of course things are a little different for us in Europe

  20. You definitely need rental insurance. There is no doubt about that. However, it’s not worth the price at all (especially when you can get it for $5/day)

  21. I am using American Express premium coverage of $25 bucks every time I rent a car (not a luxury one, just a compact). It gives me an additional piece of mind and with current rental companies’ supplemental coverage rates, it’s usually a good deal anyway. Certain foreign countries are excluded from the coverage though, so check your coverage if you travel internationally.

    • We are currently in Mexico with a rental car. While they are not on the restricted list for AMEX Premium Rental Car Insurance – the “rental car cartel” refuses to accept the policy terms!

  22. Carrie Peterson says:

    In May of this year I was driving a rental car which was rear-ended by a hit and run driver in NM. Because of a mix up with the rental car company, I did not have their CDW coverage and am having to rely on my State Farm Insurance. They have paid for the repairs to the rental car and Citibank Visa will, in the end, cover loss of use and administrative fees. Where it has gotten nasty is the diminished value issue. The rental car company is trying to charge me $3200.00 for the diminished value of the car and, even though my State Farm Policy in Oregon covers me for this loss under my uninsured motorist coverage, they are stalling and refusing to pay because they say that coverage extends only to vehicles I own. They used the same uninsured motorist coverage for the rest of the claim.

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