Does Car Insurance Cover Car Rentals?
Written by
Ann Herro has been writing about insurance and employee benefits for over 15 years. She covers topics ranging from car insurance to healthcare costs.
Reviewed by
Paul Martin is the Director of Education and Development for Myron Steves, one of the largest, most respected insurance wholesalers in the southern U.S.
Whether you’re traveling and need a vehicle or are in an accident and need a temporary mode of transportation, there’s a good chance you’ll one day find yourself behind the wheel of a rental car.
When that day comes, it's good to know in advance if and how you're covered by car insurance. Most auto insurance policies will extend to your rental car, but not every rental car situation is the same.
If you have questions about how your current policy covers rental cars, be sure to talk to an independent insurance agent. Not only can a local agent find you the best coverage for your needs and budget, but also, an agent near you can also help you understand your policy long after you've purchased it.
Does Your Current Car Insurance Cover Your Rental Car?
In short, yes. Your personal auto insurance will most likely offer some sort of coverage for a rental car if you have liability coverage, collision coverage, and comprehensive coverage. However, you’ll only be covered up to the limits available on your personal policy, and you may not be covered for every situation.
When you’re driving any car, there are two types of damage you can do. You can do damage with that car, and you can do damage to that car.
Most policies will provide coverage for any damage you do with a rental car. It’s part of your liability insurance. It’s the damage you potentially do to the rental car that can make things complicated.
If you’re driving a rental car and you dent it, your insurance may not cover the damage unless you have the proper collision coverage on your personal car and it extends to a rental vehicle.
How Does Your Personal Insurance Cover Your Rental Car?
Your personal car insurance generally covers rental cars with the same coverage limits and deductibles as your policy. Understanding what coverage your personal auto policy has and how it transfers to a rental car can help determine whether you need additional insurance offered by the rental insurance company.
- Liability insurance: Your auto liability insurance will likely provide protection against any injuries you cause or any damage you do to another vehicle in your rental car if you’re at fault. You’ll be covered up to the policy limits that you chose.
- Collision and comprehensive coverage: Your collision coverage will likely protect you if you damage the rental vehicle in a collision. Your comprehensive coverage will protect you from any damage to the rental vehicle due to theft, fire, floods, falling objects, severe weather, and vandalism. Your comprehensive or collision deductible will apply.
- Personal injury protection (PIP) or medical payments coverage: You may have PIP or medical payments coverage on your personal car insurance policy. These cover medical expenses for you or your passengers after an accident, regardless of fault. Your state law determines whether these coverages are available or if you're required to have them.
What Types of Insurance Does the Rental Company Offer?
When you rent a car, they’ll ask if you want to purchase their insurance. Rental companies offer four insurance options, and you can choose them individually or decline insurance from the rental company.
- Collision damage waiver (CDW): Also called a loss damage waiver (LDW), this covers your rental car if it is damaged or stolen. It might be a good option if you don't have personal car insurance, you don't have a credit card that offers rental car coverage, or you don't want to purchase separate rental car coverage from a third-party provider.
- Supplemental liability protection (SLP): Covers property damage and bodily injury that you cause while driving the rental car. Unless you have very low liability limits in your personal auto policy, you probably don't need to purchase this coverage from the rental company.
- Personal accident insurance (PAI): Covers medical, ambulance, and death benefits for you or the driver of the rental car. You may already have this type of coverage through the personal injury protection or medical payments coverage in your personal auto insurance and your health insurance.
- Personal effects coverage (PEC): Covers your personal belongings if your rental car is burglarized. This coverage may also exist in one of your other insurance policies, so it’s best to check with your independent insurance agent to know what coverage you already have.
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When Should You Purchase Additional Rental Car Insurance?
At such low costs, it’s easy to be tempted to add one or all of the insurance options offered by rental car companies. But if you have the same or overlapping coverage in your personal car insurance or one of your other insurance policies, it's not usually necessary.
Here are a few scenarios where you might consider the additional insurance:
- If you don’t have collision and comprehensive coverage. If your personal auto policy only has liability coverage, you’ll want to consider purchasing the collision damage waiver to protect yourself against any damage that may happen to the rental car itself.
- If your liability limits are low. In some states, the mandated minimum liability coverage is as little as $15,000 per person. If you cause an accident that results in anything more than $15,000 in damage, you’ll be responsible for the difference.
- If any of your personal insurance doesn’t extend to a rental car. If your health insurance does not offer coverage if you get injured in an accident while driving a rental car, then you may want to consider purchasing the personal accident insurance.
- If you’re renting a car internationally. If you’re renting a car outside the U.S., you’ll have an entirely new set of rules and guidelines to understand. Most car insurance companies will not extend coverage outside the U.S., so it’s smart to opt for the offered additional coverage.
- If you’re renting a car in bad weather. If you are driving a rental car in heightened dangerous driving conditions, like a winter storm, you may want to consider adding extra insurance.
How Can an Independent Insurance Agent Help?
The easiest way to know whether you need to purchase additional car rental insurance is to understand your risks and what your current insurance offers.
If you’re in an accident in a rental car, the rental company will hold you responsible not only for the damage but also for the lost income from the car being out of service, any claims handling fees and administrative work, and sometimes the diminished value of the vehicle.
An independent insurance agent can help you understand your personal car insurance policy and whether or not you'll need additional protection when you rent a car.