To Purchase or Not to Purchase Rental Car Insurance

Whether or not you should purchase the coverage offered by rental car agencies is a complicated question and unfortunately, it does not have a simple answer. The rates for this coverage vary greatly and depend on factors such as the car you’re renting, who’s renting it to you, the country, the deductible per loss and coverage you may have through other policies. While we are not able to explain how your specific rental contract will operate, the following information could help you save a pretty penny and allow you to leave the rental counter knowing you made the right decision.

Types of coverage available from the rental agency when you rent a car

• Loss-damage waiver (aka collision damage waiver) - Typically waives financial responsibility if the rental car's damaged or stolen; also covers loss-of-use charges while the rental's in the shop, towing charges, and related fees
• Liability coverage - This state-required coverage protects you from potential lawsuits
• Personal accident insurance - Covers medical costs after an accident
• Personal effects coverage - Insures what you keep in the rental car

Know what coverage you may already have for rental cars

If you have reliable car insurance, renters/home insurance, and health insurance, you can save money by declining some or all of the coverage options. Here's why:

• When you buy car insurance, you're required to buy a state-mandated amount of liability coverage (except in New Hampshire, where it's optional), meaning you likely won't need to add it at the counter.
• If you have health insurance, consider declining personal accident insurance if your health plan covers accident-related injuries. If you have personal injury protection and/or medical payments coverage on your car insurance policy, it would also offer the same protection if an accident occurs.
• And finally, if you have renters or homeowners insurance with off-premises coverage, your things are already insured before you load up the rental car. So consider declining personal effects coverage as well.

Reasons you should consider buying the Loss-damage waiver (LDW)

Of the 4 rental car insurance coverages listed above, the loss-damage waiver offers the most protection. The extra protection provided by this coverage is worth considering if the following reasons are important to you.

• No Deductible – When your auto policy pays for the damage to the rental car, you will pay the policy deductible. There is usually no deductible with the LDW.
• No Claim on your Record – When your policy pays, the claim will show in insurance industry databases and can influence your rates in the future. LDW claims are usually not reported to the insurance industry.
• Full Coverage for Loss of Use – If you damage the rental car, you will also be responsible for the loss of rental income while it is out of use. Many auto policies do not cover this, and others provide only partial coverage. This is usually not an issue if you purchase the LDW.
• Coverage Matches Your Legal Obligation – With a collision loss, your auto policy should pay the cost of repairing the vehicle if you have full coverage. The rental agreement you signed may require much more than that. Most rental car companies now charge for Diminished Value (the reduced value of the vehicle because it has been in an accident). One major rental car company is simply selling the damaged vehicle at auction and charging the renter for the difference between the pre-loss value and the sale proceeds. If what your auto policy pays does not cover the bill from the rental car company, you will pay the difference. When you buy the LDW, your obligation for the damage is covered completely.
• You Won’t Miss the Plane – If you return the rental car damaged, you may miss your flight home as you complete paperwork. When you have the LDW, the return process for a damaged vehicle is much simpler.
• If you're driving abroad (apart from Canada), your current car insurance probably won't cover you. Check your policy's declarations to find out.

Ultimately, you'll want to be sure to check your car insurance policy or call your insurance company to find out which of these coverages extend to your rental car. Also, if you'll be paying for the rental car with a credit card, check with your credit card company to see what additional rental car coverage is provided. Call the number on the back of the card you use to pay for the rental before buying extra protection.