Four facts about rental car insurance

 

The basic facts you need to know about rental-car insurance come down to four points:

• You absolutely must be covered for liability and collision when you drive a rented car.
  
  
• Some combination of your regular auto insurance and your credit card probably provides both protections.
  
  
• You don't need any other special rental-car insurance.
  
  
• Any insurance you may buy from a rental-car company is substantially overpriced, compared with other sources.

Here's how those facts affect your decisions when you rent a car.

Why you need liability and collision insurance
Liability insurance protects you against claims for loss—personal injury or property damage—that you might inflict on others when you drive a rented car. You can't afford to drive any car without it; your risk can be many times the value of the car.

Base rental rates used to include good liability coverage, but now they include only the minimum required by state law—in some states, none at all.

Collision insurance covers damage to or theft of the car you've rented. If you aren't insured, you could be on the hook for the full value of the car if something happened.

Collision insurance is only rarely included in base rental rates.

Your own auto insurance can be some protection
When you drive a rented car in the United States or Canada, chances are your regular auto insurance covers you for both liability and collision.

But some policies cover collision for only a limited time, and some apply only to a replacement car when your own is being fixed—not to business or vacation rentals.

Your credit card may cover you
At no added cost, all Gold MasterCards and Visa cards, all Diners Club cards, and most American Express cards provide automatic collision coverage—but not liability—when you use one of them to rent a car. To activate this provision, you must decline the rental company's coverage.

If you're also covered by your regular auto insurance, most credit card companies require that you claim from the insurance company first; the card picks up any leftover charges. Diners Club and a few other cards, however, provide "primary" coverage: They pick up the tab no matter what other insurance you have.

Some cards limit their coverage to rentals of 14 days, others to 30 days or one month. Check your card's provisions. If you plan to rent for a longer period, you'll either have to buy separate insurance or buy from the rental company: Cards don't cover back-to-back rentals.

Check your coverage before your trip
When you're planning to rent a car, clearly your first step is to find out exactly what risks your regular insurance and your charge card(s) cover.

If you aren't covered for liability (or if you don't own a car and don't have regular auto insurance), you'll have no choice but to buy extra liability coverage—from your regular insurance agent for an extended period, or at the rental-car company's expensive daily rate for a shorter period.

If you aren't covered for collision, you'll have to buy the rental company's collision-damage or loss-damage waiver (CDW or LDW), adding as much as US$20 a day to your rental.

Rental-car companies also push accident and personal effects insurance. Always decline these: Chances are they duplicate coverage you already have through your household policy. And even if they don't, their cost is far out of proportion to your risk.