First: Understand Your Own Coverage
Before renting a car, it’s worth reviewing your personal auto insurance coverage with your agent. Why?
“In most cases, the coverage you have on your own car extends to a rental car you drive within the United States. “So if you have comprehensive and collision coverage on your own car, you may have it for the rental car, too.” Your personal auto insurance will also include liability coverage and any additional coverages you’ve opted for, such as personal injury protection. Those coverages may extend to your rental car.
Another reason to consider skipping the rental agency’s insurance, according to Levin: Certain credit cards offer free extra insurance if you pay for the car rental using that card.
If you have extra rental car insurance through a credit-card issuer, call the toll-free number on the back of your card and have them explain your options in detail before you reserve your car. Your card issuer’s insurance is typically “secondary,” meaning that it may pay your deductible and any expenses that exceed what your primary insurance company will pay, according to the Insurance Information Institute (III). However, some credit cards offer you primary insurance for rental cars. Be sure to check before you rent.
Next: Understand the Rental Options
Most rental car agencies break out their extra insurance offerings into three sections: Liability coverage, supplemental coverage and damage-waiver coverage, says Levin.
Liability coverage is intended to help protect you if you injure someone or damage their property while driving, explains the III. “If you have sufficient liability coverage through your own auto insurance, you shouldn’t need to buy any extra coverage from the rental agency,” Levin says.
Supplemental coverage could include personal property coverage (in case your laptop, clothing or other items are stolen from the rental car) and personal injury protection. If you have renters or homeowners insurance, you’re typically already covered for personal itemsdamaged or stolen in a rental car through what’s known as “off-premises coverage” and probably don’t need to buy extra protection, says Levin. Check with your agent, but your off-premises items are usually covered at 10 percent of the personal property coverage you have for your home or rental, says Levin. If you have $50,000 in personal property coverage, for instance, you’d typically have $5,000 in coverage for personal items stolen or damaged while in the rental car.
Collision loss/damage waiver (also known as a loss damage waiver, or LDW) isn’t technically insurance. If you damage the rental car, this waiver helps cover the cost of repairing the car so you don’t need to file a claim with your own auto insurance, says Levin. This also prevents a rental car accident from going on your personal auto insurance record and potentially increasing your rates down the road, she says.
The big caveat: The waiver can be expensive — perhaps doubling your daily rate on the car, she says — so think carefully. “It’s not a bad product — it’s just that it’s often unnecessary,” adds Levin.
Two other reasons to consider the waiver: If you’ve dropped collision and/or comprehensive coverage on your own car, you wouldn’t have that coverage to extend to the rental car, notes Levin. A rental agency could charge you for “loss of use” of the car (lost rental income) while the car is in the shop being repaired. Your own auto policy typically won’t reimburse you for that, Levin says. Be sure to read your car rental agreement carefully to clarify what kinds of charges you could incur if you were to damage the vehicle.