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Do You Need Liability Insurance for Your Rental?

Updated 04/01/2021

When you’re on vacation and about to rent a car, you might ask yourself, “do I need rental car insurance?” Sure, rental car insurance might seem like a scam. After all, what are the chances you’ll ever need it? But when you start thinking about being held responsible for the damages to your rental if you get in an accident, suddenly it becomes a lot more appealing. After all, putting an entire car on your credit card will probably exceed your vacation budget.

Clearly, having some kind of insurance for your rental is imperative. But do you really need to buy those expensive add-ons at the service counter? Let’s take a look at some reasons you might not need to purchase separate liability insurance for your rental — and some instances where it’s crucial.

Rental Car Insurance Options

When you rent a vehicle, the person at the rental counter will ask if you want to purchase rental car insurance. You can also buy rental car insurance online if you make your booking virtually. There usually are four types of insurance available, and you might need all four or none, depending on your circumstances.

Most car rental companies offer a collision damage waiver, liability coverage, personal accident insurance, and personal effects coverage. Rental car insurance can be expensive. The rates are charged by the day and can add up for long-term rentals.

Collision Damage Waiver

A collision damage waiver protects you if the rental car is stolen or damaged and covers towing and loss-of-use charges when the vehicle is being repaired. It typically runs between $10-$30 a day. If you’re in the United States, you won’t have to pay a deductible for coverage. However, some other countries will require you to pay a deductible for coverage to kick in. It’s very similar to collision and comprehensive car insurance.

Liability Coverage

Rental car insurance liability coverage protects you from lawsuits if you’re in an accident. For example, this might kick in if you cause an accident and someone sues you for their medical bills. This doesn’t provide any protection for damages suffered by you, your passengers, or the car. Expect it to run about $10-$16 a day.

Most states regulate minimum liability insurance, so every rental should come with this standard coverage. You only need to pay for this if you want additional coverage. Think of it as bodily injury liability and property damage liability insurance, but just for rental vehicles.

Personal Accident Insurance

This coverage pays for medical costs due to an accident. It covers you or anyone in your vehicle at the time of the accident. It might cost between $3-$9 a day and is most similar to personal injury protection and medical payments insurance in standard car insurance.

Personal Effects Coverage

If you’re vacationing in a touristy area, you have to be especially careful about thieves and burglars. Personal effects coverage protects the items stored in the rental car. This might include your luggage, clothing, or electronics. Just be aware, expensive electronics may have a coverage limit or exclusion, meaning you might not be fully reimbursed. This runs $1-$6 a day and is most like the coverage you get from homeowners or renters insurance.

While it seems like you would need this insurance for hire cars, that’s not always the case. It depends on your current coverage.

Do I Need Rental Car Insurance If I Already Have Car Insurance?

If you already have auto insurance for your own vehicle, chances are you may not need to think about rental car insurance at all. That’s because some policies include coverage for when you drive a rented vehicle for pleasure. So why pay extra for something you already have?

Whether or not you’ll be covered depends on the specifics of your policy, though. Before buying rental coverage insurance, check your auto insurance policy. If you have liability coverage that extends to rental cars, see how much you carry. Is it enough to pay for property damage and medical costs if you’re in an accident? If so, you likely won’t need liability insurance for a rental.

You should also check your comprehensive and collision coverage. You likely only have this coverage if you’re still paying on your vehicle. If you do have this coverage, make sure it will still work when you drive a rental car. You’ll also want to make sure it’s enough to cover the cost of repairs to your vehicle. If you drive a small sedan but decide to splurge and rent a sports car, chances are your coverage might not be adequate if you get in an accident. A little extra insurance coverage from the rental company can’t hurt in this case.

Finally, see if your policy includes personal injury protection. This coverage kicks in when you’re in an accident that’s your fault and will cover your medical bills. It’s crucial to have coverage like this when you’re traveling, as your health insurance may refuse to pay for some things if you’re out of network. Personal injury protection just adds peace of mind should the worst happen.

Keep in mind, if you are in an accident, your personal car insurance coverage will likely kick in before your rental car coverage does. That means that if you were trying to buy a rental car policy to avoid having to report to your insurance, you’re out of luck. Typically, that type of coverage only kicks in once your personal coverage has hit its limits.

I Don’t Have Car Insurance — Can I Rent a Car?

Nearly every state requires you to have car insurance to operate a vehicle — the only exceptions are New Hampshire and Virginia. But maybe you don’t currently own a vehicle, so you have no need for an auto insurance policy. Can you still rent a car?

Yes, you can rent a car! But you just won’t have as much protection as you would with a personal auto insurance policy. In these cases, we’d recommend choosing car rental insurance. The car will automatically come with the local minimum coverage required by law. However, that may not be enough if you get into a serious accident. And if you’re traveling out of the country, laws can vary wildly, so you may or may not be protected.

Liability insurance is typically the only required insurance coverage in each state, so most rental cars probably won’t include collision or comprehensive insurance unless you add these on. Without your own policy to protect you, you’re at risk for huge repair bills, so adding extra protection here is a great idea.

Do I Need Rental Car Insurance If I Have Health Insurance?

In the United States, most health insurance policies will cover your injuries in a car accident without question. Even policies with strict network requirements should cover emergency room visits, or medically necessary hospital stays as the in-network rate. This means if you need life-saving care, you won’t have to bankrupt yourself to get it (though you may need to transfer to an in-network hospital as soon as medically viable).

This might change if you’re out of the country, though. That’s why it’s important to closely read the terms of your health insurance to see what is and what isn’t covered. If your coverage is strict about receiving out-of-network care or limits responsibility for bills accrued outside the country, adding on some additional personal accident insurance can’t hurt.

While health insurance may provide medical protection for you during an accident, it doesn’t cover any damage to your vehicle, damage to other vehicles, or other people’s medical bills. So you may need to add on this coverage depending on the other factors we’ve been discussing.

Do I Need Rental Car Insurance If I Have Homeowners Insurance?

Your homeowner’s insurance policy can also protect you when you drive a rental car. Your policy might cover your belongings even when they aren’t in the home. If so, you don’t need personal effects coverage.

For example, let’s say you bring along an iPad, a designer purse, and your suitcase filled with clothes in your car. If someone breaks in and takes these things, insurance will reimburse you for your losses. There are just a couple of caveats.

First, high-end electronics and cameras usually aren’t covered unless you take out a specific rider on them. Second, coverage is typically for personal purposes only. If you’re on a business trip, you may have to look to your employer’s insurance for help.

Just like with health insurance, this type of coverage doesn’t cover damage to anyone’s vehicle or any medical bills. Make sure you have enough coverage in those areas before setting off on your trip.

Do I Need Rental Car Insurance If I Have Traveler’s Insurance?

Travel insurance is a great way to make your next trip go smoothly, no matter what happens. It can provide trip cancellation or delay reimbursement, health insurance abroad, and lost baggage reimbursement. It’s basically a combination of health and homeowners insurance, but just for the duration of your vacation.

Your traveler’s insurance policy can also substitute for rental car insurance. It might include collision coverage for rental cars, and it’s typically cheaper than what you’ll pay a rental company. Always read the fine print of any traveler’s insurance policy before buying in. Like with rental car insurance, you may find that you have enough coverage from your existing policies to protect you on the road.

Do I Need Rental Car Insurance If I Have Credit Card Benefits?

Before you purchase liability insurance for a rental vehicle, review your credit card. It’s a little-known fact, but many cards provide rental insurance when you use the card to secure the rental.

Many credit cards offer collision protection that can cover you if you’re in an accident. This insurance usually requires you to exhaust all other forms of insurance first, but it can be your primary coverage if you don’t have other insurance.

Just make sure you decline the collision damage waiver offered by the rental car company. If you don’t, this policy will cancel out the credit card’s coverage, meaning they won’t pay anything if you’re in an accident.

Don’t forget, there’s usually a time limit for how long a credit card will cover a rental car. Some cards set the limit as low as 15 days, which might not be enough if you require long-term rental car insurance.

Curious about what exactly a credit card covers? Here’s a look at the coverage for the Platinum Card from American Express:

  • Rental vehicle damage and theft up to $75,000
  • Accidental death or dismemberment up to $200,000 per cardmember and $20,000 per passenger, up to a total of $300,000 per accident
  • Accidental injury coverage up to $5,000 per car rental claimant
  • Car rental personal property coverage up to $1,000 per claimant for a total of $2,000 per incident
  • Also, your card might cover towing costs

As you can see, this coverage is pretty comprehensive and should offer you complete protection if you’re involved in an accident.

Should You Get Additional Coverage?

You still want to know, “Should I insure my rental car?” It all really depends on the amount of coverage you currently have or don’t have.

If you don’t have comprehensive and collision coverage, you should consider getting the collision damage waiver. Also, if you don’t have personal injury protection or health insurance, you’ll need personal accident insurance. You can also consider personal effects coverage if you don’t have protection.

Some people are comfortable with lesser amounts of coverage, while others prefer to have a blanket of protection. At the end of the day, it’s up to you to decide how covered you’d like to be.

Make a Wise Decision Regarding Rental Coverage Insurance

Review your insurance policies before buying car rental insurance. You likely won’t need it. If you do, purchase the type of policy you need to protect your financial interests when on the road.

Still not sure if insurance will cover your rental car? Our insurance experts at Freeway Insurance can help! Get a free car insurance quote today online, over the phone, or at one of our offices near you.

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