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Auto Insurance Coverage for Rental Cars

The world of insurance doesn’t get any less complex for short-term car rentals. Luckily, we have the information that you need to manage your personal risks when renting a car for a trip or temporary transportation. Rental car insurance provides temporary coverage for a specified time, but what it covers can vary depending on the type of insurance and the policy. Let’s dig in and hammer out the details.

What is Rental Car Insurance?

Rental car insurance provides specific coverage when you rent a car from a rental company like Enterprise, Avis, or Budget. Similar to your everyday auto insurance, rental car insurance typically covers liability, collision damage, and comprehensive.

Do You Really Need Rental Car Insurance?

There are a lot of misconceptions about rental car insurance, in part, because insurance is confusing. There are different types of coverage like liability protection, collision repair, or personal effects coverage. There are also many different ways to obtain rental car insurance, including from the rental company, your insurance company, and even your credit card company.

The truth is–one way or another, you need coverage. That does not necessarily translate to needing coverage from the car rental company at a big markup. Let’s talk about that some more.

Does Your Personal Auto Insurance Cover Rental Cars?

If you carry full auto coverage insurance, which is generally defined as a minimum of liability, collision, and comprehensive; then the answer is likely yes. If you’re already paying for appropriate levels of coverage and they can be extended to your rental car, it may feel unnecessary to purchase additional coverage.

However, if you’re renting a car that is much more valuable than your car or your current policy lacks coverage for property loss, the rental company may strongly advise or even require you to purchase additional coverage.

What Kind of Coverage Comes with Rental Car Policies?

While most insured car drivers traveling for personal reasons will not need to buy additional coverage, some situations may warrant more coverage. For example, if you have a high deductible and you don’t want to risk that expense out of pocket you could buy a separate policy from your insurance agent. Likewise, if you do not have existing coverage or it’s insufficient to cover your rental, you may need to purchase that additional coverage.

A typical car rental insurance policy from your agent covers four things:

1. Liability

2. Collision

3. Personal Accidents

4. Personal Effects

These coverage categories are a little different than what you might find offered by a car rental company or your credit card company. Below, we’ll take a look at how typical rental car coverage compares to things like loss and damage waivers and supplemental liability insurance.

Collision Insurance Vs. Loss and Damage Waivers

You know that you need protection in case your rental car is damaged. The difference between collision insurance and LDW waivers comes down to how these damages are covered. With insurance, your deductible still applies and the coverage limits depend on your policy. With an LDW, you should pay close attention to the language. Some LDWs only limit your liability, rather than removing it completely. This means you could still be on the hook for several thousand dollars.

Rental Car Collision Insurance (CDW)

Collision insurance for rental cars covers repairs for any damage that you cause to a rental car. There may be specific exclusions depending on the policy, so take time to understand what you’re buying. Similar coverage may be provided through your collision and comprehensive riders on your personal auto insurance. Check with your agent before purchasing additional coverage.

Loss and Damage Waivers (LDW)

When you purchase a damage waiver through Enterprise, it is not considered insurance. Instead, it is considered a waiver of responsibility for damages. The cost of this coverage varies by vehicle and location. For example, renting a mid-sized SUV in the Midwest can cost between $22 - $30 per day.

Liability Insurance Vs. Supplemental Liability Insurance

Minimum liability insurance is required in order to legally operate a vehicle on the road. However, supplemental liability insurance frequently peddled by car rental companies is not required.

Rental Car Liability Insurance

Liability insurance covers damage or injury to other people or property caused by you as an operator of the rental car. It’s similar to minimum liability coverage that is mandated in most states. It’s not exactly the same as what is sold by rental car companies.

Supplemental Liability Coverage (SLI)

Rental car companies like Enterprise may sell supplemental liability insurance at a rate of $12 - $15 per day. These policies are written as excess policies meaning that they only kick in for coverage after your primary insurance pays.

Personal Accident & Personal Effects Coverage

When you’re renting a car, you are more likely to have luggage and expensive electronics like laptops in the vehicle. You’ll want to ensure that you have coverage for all your belongings in case something happens.

Personal Accident Insurance (PAI)

This type of coverage is similar to medical payments coverage through your regular auto policy. It covers the cost of ambulance rides and hospital care for you and your passengers. Depending on the policy it may or may not include coverage for your personal belongings so be careful of the language in the policy.

Personal Effects Coverage (PEC)

Unless specifically included with the personal accident insurance, you may want to include personal effects coverage for any luggage or devices that you may have in the car. These policies typically include damage from accidents or theft from vehicles.

The Bottom Line on Auto Insurance for Rental Cars

Every situation is unique. While most drivers are adequately covered by their regular auto policies and do not need to purchase any additional rental car coverage, it’s best to discuss your needs with your insurance agent. When you’re planning a trip, don’t rely on the sales efforts of the rental car company to boost your ticket price. Instead, work with a qualified insurance agent to understand what coverage you have and what–if any, may be necessary.


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