What is rental car insurance?

Rental car insurance is optional coverage you can purchase to protect your rented vehicle — and you — from damage or injury you might cause while driving. But purchasing insurance for a rental car isn’t always necessary.

Logan SachonAnna Swartz 1600

Logan Sachon & Anna Swartz

Published November 7, 2019

KEY TAKEAWAYS

  • Rental car insurance is optional coverage you can purchase in case you have an accident while driving a rental vehicle

  • But if you have your own car insurance policy, it likely extends to cover rental cars too

  • Many credit cards also offer limited coverage for rental cars, so check to see if you're covered that way

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

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.

You'll almost certainly be offered extra coverage when you rent a car. Deciding whether or not to purchase the rental company’s extra insurance can be confusing — is it necessary coverage or are you being upsold? The answer is, it depends.

Many drivers are already covered while driving a rental car, either by their regular car insurance policy or through a credit card. But in some cases, purchasing coverage from the rental agency is a good idea. Let’s go over what the rental agency is actually offering, and whether you should spring for any of their additional coverage.

In this article:

What is rental car insurance?

When you rent a car through a rental company, it will include the minimum amount of liability coverage required in that state. The rental car company also offers additional coverage you can purchase at an extra cost per day.

Like standard car insurance, these coverages offer different types of protection. When you rent a car, you’ll be offered four main categories of coverage to add on to your rental:

Supplemental liability insurance (SLI)

As is the case with standard car insurance, liability coverage covers the costs of any damage or injuries you cause while driving the car. So if you’re the at-fault driver in an accident while driving your rental car, liability insurance will cover the other driver’s repair bills and medical expenses. If you have your own car insurance, your liability coverage likely extends to a rental car, and you may not need to purchase extra.

Loss damage waiver (LDW)

Also called the collision damage waiver (CDW), this isn’t technically insurance coverage. Instead, it’s an upfront cost that means you won’t be financially responsible if your rental car is damaged while in your care. If you don’t purchase this, you could be on the hook for any scratches, dents or other damage to the rental car, as well as extra costs like towing or administrative fees. You might also have to pay what are called “loss-of-use” fees, meaning the rental agency will charge you for the time spent repairing the car, since they’ll theoretically lose money by not being able to rent out the car while it’s in the shop.

If your personal car insurance policy extends to cover rental cars, then your comprehensive coverage and collision coverage may extend to cover damage. Keep in mind that you still have to pay a deductible like you would if the damage were to your own vehicle. If you don’t have your own auto insurance policy, you may want to consider adding the LDW to your rental car so you aren’t on the hook for damage or theft.

Personal accident insurance

This is an additional coverage that pays out if you or your passengers are injured in an accident while in the rental car. However, if your own auto policy includes personal injury protection (PIP) or medical payments coverage, you’ll be covered for injuries sustained in a car accident. If you have robust health insurance, you can probably skip adding personal accident insurance to a rental car.

Personal effects coverage

This covers the cost of replacing your personal belongings if they’re stolen from inside your rental car, including clothing, cellphones, computers and other valuables. But if you have renters insurance or homeowners insurance, your personal items will already be covered and 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 rental car company, and by how much coverage you choose. Here are some average ranges for each component of rental car insurance:

  • 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, expect to pay between $33 to $47 per day on top of the cost of the rental car.

Does car insurance cover rental cars?

If you have your own auto insurance, it’s likely that coverage extends to rental cars. If you cause an accident in your rental car, your liability coverage will cover the costs just like if you were driving your own car. If your rental car is damaged, your comp and collision coverage will protect it — but you’ll have to pay your deductible just the same.

Wondering how to tell if your car insurance covers rental cars? 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 separate rental car insurance, it will be your primary form of auto insurance coverage. Your car insurance may also exclude certain rental cars, like luxury vehicles, and it will typically only cover rental cars on U.S. soil.

If you’re unsure about whether your policy includes this coverage, call your car insurance company.

One word of warning: If you file a claim with your car insurance for a rental car accident, your rates could go up, just like if your filed a claim for an incident involving your own vehicle.

What about rental reimbursement coverage?

Many car insurance policies have what’s called rental reimbursement coverage, also called substitute transportation coverage, or loss-of-use 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 after a covered loss. Say a snow-covered tree branch fell on your car, damaging your its hood. Comprehensive coverage will cover the cost of the damage, and if you have rental reimbursement coverage, that will cover the cost of renting a replacement vehicle while yours is being repaired. Rental car insurance is typically not paid for by rental reimbursement coverage.

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Can I rent a car without insurance?

We’ve already gone over how your regular car insurance can extend to cover a rental, but what if you don’t have a car or auto insurance and you want to rent a car for a trip? You can still rent a car without insurance, and you may not need to purchase rental car insurance. If you pay for your rental car with a credit card, the card may offer you a limited amount of insurance coverage on the rental.

The insurance offered by your credit card is usually collision damage waiver coverage, not liability coverage. In most cases, if you buy the rental car company’s insurance product, your credit card’s CDW benefits will not apply.

To access the coverage through your credit card, 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 offer towing coverage.

Which credit cards offer rental car insurance?

Credit card car rental insurance is typically considered secondary coverage, meaning it can step in and fill in the gaps where your primary car insurance doesn’t cover the costs. However, depending on your card and the state where you rent a car, credit cards can also serve as your primary insurance when renting a car.

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.