Do I Need Rental Car Insurance?

If your vacation is going to include a rental car, then your insurance agent, not your travel agent, should be the first call on your list.

That's because insurance carriers, credit card companies and car rental agencies are competing for your insurance dollars – and more importantly, what they offer you today might be different from what they'll be offering you next week.

It's up to be up you to make sure you're covered when you rent a car, so plan ahead. If you have auto insurance, call your agent and find out what kind of coverage you have. Most auto policies extend to rental cars.

Find Out If Your Rental Car Is Covered:

• Check Your Existing Auto Insurance Policy: Review your auto insurance policy or call your insurance agent before you rent a car. You don't want to pay extra money at the rental counter for coverage you already have.
  
  Most auto insurance policies will provide liability insurance if you injure someone in an accident. However, damages to the rental car are only covered under your policy's comprehensive and collision coverage. Make sure your auto policy includes this type of coverage.
  
  Ask specifically about two things: collision damage waiver and liability. Collision damage waiver, or CDW, covers any damage to the car you are driving. Liability covers damage you do to someone else.
• Check Your Credit Cards: In some cases, your credit card will pay for damages to a rental car in the event of an accident. To be eligible, you probably would have to decline the collision damage waiver from the rental company as well as charge the full amount of the rental car on your card. Make sure your credit card offers these services. Also make sure you understand all limitations and exclusions your credit card may issue such as limited rental contracts and approved rental dealers.

You can safely decline the rental car company’s collision damage waiver if you're absolutely sure your auto insurance or credit card has got your back.

Collision Damage Waiver - Why It Works For Some Travelers

Buying the collision damage waiver is a smart move for some people. Here are the reasons why:

• Lack of Coverage. If you aren't covered under your own insurance or credit card, then purchasing the collision damage waiver is your best option. Paying about $8 to $11 a day is small change compared to the $15,000 to $20,000 it would cost to replace the rental car.
• Avoid “Loss of Use” Fees. The collision damage waiver also pays for "loss of use." If you damage a rental car, the rental company charges you for the money it loses during the time the vehicle cannot be rented. In most states, loss of use is not covered under auto insurance policies. The exceptions are: Alaska, Connecticut, Louisiana, Minnesota, North Dakota, New York, Rhode Island and Texas.
• Accident Costs Covered Now, Not Later. If you are involved in an accident, some rental car companies want payment upfront, meaning you'll have to wait to be reimbursed from your own insurance company. This is an expensive price to pay for some travelers, so some may just opt to pay the extra price for the collision damage waiver.