What is rental car insurance?

How to decide on protection for a borrowed ride.

Logan Sachon

Logan Sachon

Published May 18, 2018

How does rental car insurance work?

If you’ve ever rented a car, you’ve probably been asked at the counter whether you’d like to purchase rental car insurance to go along with it.

Rental car insurance protects you from the financial risks that could occur if you get into an accident with the rental car. You can get car rental insurance directly from the agency, through a third-party insurer, or even as an extra benefit with your credit card. However, if you already have car insurance for your personal vehicle, it might cover your rental, too.

Read on to learn more about:

What is rental car insurance?

In nearly every state plus the District of Columbia, you have to have some form of car insurance before you get behind the wheel. While the car you rent from a car rental company will be covered with just enough liability car insurance to meet your state’s minimums, that might leave you without coverage for some major out-of-pocket expenses.

If the car insurance you have for your usual ride doesn’t include rental car insurance, then you might need to purchase coverage. As with your personal auto policy, rental car insurance may reimburse you for damages or injuries you’re liable for as well as when the rental car is stolen or destroyed.

What does rental car insurance cover?

Most car rental companies break up coverage at the counter into four parts:

Supplemental liability insurance (SLI)

Covers damages you cause with the car to someone else’s car as well as bodily injury you cause to people in the car. This is similar to the liability coverage your regular auto insurance policy includes.

Loss damage waiver (LDW)

Also called the collision damage waiver (CDW). This functions similarly to the collision and comprehensive coverage you’re used to with your individual car insurance policy in that it covers your expenses when the car is damaged or stolen. These expenses include:

  • Paying to repair or replace a lost or destroyed vehicle.
  • Towing or administrative fees.
  • “Loss-of-use” fees, which rental car agencies charge to make up for the revenue they lose on when the rental car is in the shop.

If your auto insurance policy covers rental cars but you don’t have comprehensive and collision insurance, then you may need CDW coverage. Otherwise, you could be stuck paying cash to fix any property damage to the rental.

Personal accident insurance

Covers any medical expenses you or your passengers incur as the result of a rental car crash. If you have health insurance, you can usually skip this one.

Personal effects coverage

Covers any of your belongings, should they get stolen from your rental car. If you have renters insurance or homeowners insurance, you can skip this one, too.

How much does rental car insurance cost?

Just like standard car insurance, the cost of rental car insurance can vary by state, by company, and by how much coverage you get. Here are some average ranges for each component:

  • Supplemental liability insurance (SLI): $8 to $12 per day.
  • Loss damage waiver (LDW) or collision damage waiver (CDW): $20 to $30 per day, if purchased from the rental car company. Some third-party insurers, like Allianz and Traveler, offer collision insurance for less than $10 per day.
  • Personal accident insurance: $3 per day.
  • Personal effects coverage: $2 per day.

For full coverage, rental car insurance costs between $33 to $47 per day.

Does my car insurance cover rental cars?

In many cases, you don’t need to purchase car rental insurance because the auto insurance you have already extends to rental cars. Whether you have car insurance for your personal vehicle or a non-owner liability policy, there are two ways that the policy could cover your rental car.

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Rental car insurance in the policy itself

Check the “definitions” section of your car insurance policy. When rental car insurance is included in your policy, you’ll see that “covered vehicle” includes any vehicle rented by you (in addition to all the other types of vehicles you may drive that are covered). There may be a caveat that if you purchase a separate rental car insurance policy, it will be your primary form of auto insurance coverage.

If rented vehicles are not included under this section, then you don’t have coverage for them. If you’re unsure about whether your policy includes this coverage, call your car insurance company. And if you’re currently in the market for car insurance that features rental car insurance, talk to a licensed representative at Policygenius, who can point you in the right direction of the most affordable auto insurance that includes coverage for rental cars.

Note that many car insurance policies do have something called rental reimbursement coverage. This is not the same thing as rental car insurance. Rental reimbursement covers the cost of renting a car while your own car is in the shop because of a covered loss. Rental car insurance is typically not covered by rental reimbursement coverage.

Rental car insurance as additional coverage

Your car insurance policy can be enhanced by purchasing a rider or endorsement, which modifies the terms of the base policy and adds new coverage. If your car insurance doesn’t include coverage for rental cars as is, ask your insurer about a rental vehicle coverage endorsement.

Which credit cards offer rental car insurance?

Many credit cards now come with car rental insurance. Usually, the insurance offered by your credit card is collision damage waiver coverage, not full rental car coverage. In general, if you buy the rental car company’s insurance product, your credit card’s CDW benefits will not apply.

To access the coverage, you need to charge the cost of the rental car to your credit card; if you get into a covered accident or the car is stolen, the credit card company will reimburse you up to a certain dollar amount. Some credit cards also come with towing coverage.

Credit card car rental insurance is considered secondary coverage. If you have rental car insurance through another policy, this coverage will be considered primary when you file a claim.

Some credit cards that come with rental car insurance include:

  • Chase Sapphire Preferred and Chase Sapphire Reserve cards
  • Chase Hyatt and Chase World of Hyatt cards
  • Chase United Explorer and United MileagePlus cards
  • Chase Amazon Rewards Visa Signature cards
  • American Express Green, American Express Gold, and American Express Platinum cards
  • American Express Hilton Honors and Starwood Preferred Guest cards
  • American Express Delta SkyMiles cards
  • Mastercard
  • Capital One Visa Platinum card

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.