Should You Buy Insurance When You Rent a Car?

Renting a car can make your life easier in many ways, whether it’s for a cross-country trip that requires more leg room or because your everyday driver is in the shop. But that doesn’t mean the process is always stress-free. One of the biggest questions that arises for many people renting cars is whether or not they should purchase insurance coverage from the rental car company.

Chances are that the rental car company will pitch the insurance to you in a way that makes it seem almost essential. In some circumstances, there are good reasons to purchase the insurance coverage and damage waiver offered by the rental car company. However, it is important to remember that the car rental agency is also making money on that insurance coverage. So, they have an incentive to persuade you to buy it whether you need it or not.

Since rental car coverage can add significantly to the daily price of renting a vehicle, it is important to understand what you do and don’t need. This may require a bit of research in advance.

 What Types of Insurance Do Rental Car Companies Sell?

Traditional rental car companies typically offer four types of insurance coverage. These are:   

• Liability coverage, which covers damage you may cause to another person or their property in an at-fault accident
• Personal accident insurance, which covers injuries to you and your passengers
• Loss/collision damage waiver, which relieves you of responsibility for damage to the rental vehicle while it is in your care
• Personal effects coverage, which covers loss of or damage to your personal property under certain circumstances

Note that insurance options and issues may be different when using a peer-to-peer rental system.

How to Know Whether and Which Coverages You Need

The first step toward determining what types of rental coverage you may want to purchase is to check with your own automobile insurance carrier.  Often, your own automobile insurance will cover the same types of liabilities as some or all of the coverage offered by rental car companies. In fact, in many cases the coverage offered by the rental car company only kicks in  when your own automobile insurance coverage is insufficient.

For example, most people who own their own vehicles have liability coverage. It is required by law in Massachusetts, and most New Hampshire drivers carry this coverage even though state law doesn’t mandate it. 

Liability Coverage

A driver with their own liability coverage will typically have the same coverage operating a rental car as they would operating their own vehicle. For many drivers, that means there is no reason to purchase the additional liability coverage offered by the rental car company.

However, there may be circumstances in which you will want to purchase this coverage. First, if you do not have your own liability coverage, the rental car company will typically require you to purchase liability insurance through them. Some people also choose to purchase this supplemental coverage because the liability limits may be significantly higher than what they are carrying on their own vehicle, and they want the additional protection when traveling. 

Personal Accident Insurance

Personal accident insurance is similar. If you have personal injury protection and/or medical payments on your own automobile insurance policy, you may not need this type of coverage. However, you will want to compare the coverage amounts and determine whether the coverage offered by the rental car company would be in addition to amounts paid by your own auto Insurance carrier.

Loss/Damage Waiver

The loss damage waiver situation is a bit different. While the vast majority of drivers carry liability insurance on their vehicles,  full coverage is not mandatory. Often, people choose to drop this coverage on their cars as their cars age, since the return they will receive if they are in a collision declines with the value of the car.

If you don’t have this type of coverage on your own vehicle, then you will not have this type of coverage for a rental vehicle – – unless you purchase it. That means if you are in an at-fault accident and damage or total the rental vehicle, you would be personally responsible for those damages. So, the decision as to whether or not to purchase the loss/damage waiver when you rent a car will depend in part on your own insurance coverage and in part on your ability and willingness to risk personal liability in the event that you are in an at fault accident or the car is otherwise damaged in your care. 

Personal Effects Coverage

Personal effects coverage is typically not included in your automobile insurance policy. In other words, your car insurance won’t cover losses or damage to personal property in your vehicle when you’re driving a rental car because they don’t cover those losses when you are driving your own vehicle. However, you may have coverage for those types of losses under your homeowner’s or renter’s insurance policy.

Other Alternatives To Rental Car Insurance

As you can see, a call to your own insurance carrier is the best starting point when determining whether or not you need to purchase insurance from your rental car provider. That may mean more than one call, if your automobile insurance and homeowner’s insurance are through separate companies.

However, your insurance carrier isn’t the only possible source of this type of coverage. Another common source of rental car insurance coverage is your credit card provider. While not all credit cards offer this benefit, it is common for credit card companies to offer insurance coverage when you rent a car using their card.

If you don’t have the paperwork you received when you got your credit card or it contains incomplete information about the type of rental car coverage it offers, a call to your credit card provider is the best starting point. In fact, you should call your provider even if you have your original paperwork, to make sure you have the most up-to-date information. However, you do not want to rely on information you receive over the phone. If you will be relying on coverage through your credit card provider, then you will want to ask them to send you full details in writing. And, you will need to make sure that you understand exactly which types of coverage they are offering and the coverage limits before you make a decision. 

Injured in a Car Accident? 

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