Rental Car Insurance: Is It Worth It?
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
Cara Carlone is a licensed P&C agent with 20 years of experience. She has her P&C license in RI and TX and holds CPCU, API, and AINS designations.
If you’ve ever rented a car, you know that you must decide whether or not to purchase the insurance offered by the rental car company before you can get your keys and drive off. Many people wonder if this extra insurance is necessary, or even a good idea. The answer to this question is not as cut-and-dry as you might think.
Rental car companies will offer you three different types of coverage. Whether or not you should purchase any or all of them depends on both what your current auto insurance policy covers and how much you can afford to lose in the event of an accident.
In this article, we explain each type of coverage so that you can best choose whether any are right for you. And if you still want to know more or you're in the market for personal auto insurance, contact a local independent insurance agent for help.
Rental Coverage Type 1: Liability Coverage
Liability insurance coverage is designed to provide coverage for personal injuries and property damage that you cause to a third party. This means that if you are responsible for a motor vehicle accident, the damages that you may be sued for can be covered up to your liability coverage limits, which will vary from one policy to the next.
If you own a car, then by law in most states, you should have car insurance. All car insurance policies offer liability protection and, in most cases, this coverage extends to your use of a rental car. Be aware that some policies specifically exclude liability coverage for rental vehicles in order to make the policies cheaper, so when in doubt, ask your insurance agent.
Ideally, your car insurance will already provide you with enough liability insurance to adequately protect your finances in the event of an accident. In this case, you do not need to purchase this insurance through the rental car company.
If you do not have a car insurance policy, or if your insurance policy specifically excludes rental car coverage, you will be required to purchase liability insurance when you rent the car. This is nothing to be upset about, as it is designed to protect you from catastrophic financial losses if something were to go horribly wrong.
Rental Coverage Type 2: Medical Payments/Personal Injury Protection Coverage
This coverage is designed to cover necessary medical costs in the event that you or your passengers are injured in a collision while driving your rental car. This can include ambulance services as well as medical treatments.
So, do you need it? Possibly.
Many people do not realize that their health insurance policy may not cover medical treatment for injuries caused by an auto accident. These are typically covered by car insurance, a lawsuit, or out of pocket.
If you have car insurance, you may or may not have this coverage as part of your policy. Most states require their drivers to carry liability insurance coverage only, but some do require medical payments coverage or personal injury protection (PIP) as part of their minimum coverage requirements.
If you do not have either of these included in your car insurance policy, it is a personal decision whether or not you want to purchase it specifically for your rental car. If you want it for the rental car, you likely want it for your personal vehicle as well, so you may want to speak with your independent insurance agent about having it added to your policy.
Rental Coverage Type 3: Loss Damage Waiver
The Loss Damage Waiver offered by a rental car company is not insurance. It is a contractual waiver that will allow you to walk away from costs accrued if you damage the car, so long as you have not violated the terms of your contract (e.g., by driving under the influence, recklessly, or off-road). Whether or not you should purchase this is a bit more complicated.
If you damage the rental car or if it gets stolen or vandalized, you are responsible for making restitution to the car rental company. You may already have a measure of coverage if your personal car insurance policy includes collision and comprehensive coverage.
If you are still making payments on your vehicle, you likely already have this coverage, as it is required by most lenders. If your car loan is paid in full, it is possible that you have foregone this coverage in order to get reduced insurance rates, and in this case, you would have no protection without the Loss Damage Waiver.
However, even with car insurance, you are still going to owe a good sum of money if you damage the car. This is because you will still be expected to pay:
- Your insurance deductible to cover the repairs
- A loss of use fee since the car rental company cannot make money off their car while it is out of service
- A diminished value fee to make up for the lost resale value of the car
- Administrative fees, because they have to pay someone to assess and collect all these fees
Bottom line: You’ll end up spending a lot of money if you damage the rental car, even if you have great insurance coverage. On the other hand, when you purchase the Loss Damage Waiver, you protect yourself from all of this, enabling you to walk away with no costs assessed to you at all.
That said, is it worth it? The Loss Damage Waiver can cost as much as $35 per day, and even more if you are renting the car in crime-ridden areas. The fact is, it's entirely up to you.
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How Can an Independent Insurance Agent Help You Get the Best Car Insurance?
When making the decision about whether or not to purchase rental car insurance, it helps to be aware of what your current auto policy covers and how much coverage you have. Before you rent a car, it may be a good idea to sit down with your insurance agent to go over your policy and get advice about coverage.
And when you're in the market to change or buy new car insurance, be sure to spend time with an independent insurance agent in your area. Independent agents work for you, not an individual insurance company. They can get quotes from multiple carriers, so you can choose the policy that's best for your needs and budget.