Auto Insurance Insurance

Is Rental Car Insurance a Rip Off?

Written by Hank Coleman

If you’ve ever walked up to a rental car counter, you’ve probably met an enthusiastic rental agent. It’s their job to speed you safely on your way. They will ask you what kind car you prefer and how long you will need it.

The rental car agent will explain how you should bring it back with the same amount of gas it has now. They will tell you that if you don’t, then they’ll charge you a premium for them to do it. They’ll ask for your driver’s license and whether or not anyone else will be driving the car.

Then, they’ll recommend that you purchase their additional car insurance coverage in order to provide yourself with the best possible protection. But, is the rental car company’s insurance worth the cost? Is it a rip off? Or, should you pony up the money to protect yourself?

Your Rental Car Insurance Options

Depending on the car you choose, rental car insurance can cost up to $50 per day. But, what exactly does rental car insurance cover?

Liability – Liability coverage protects you from damage to property other than the actual rental car that occurs while you are behind the wheel. It also protects against bodily injury to the passengers and driver of other vehicles and pedestrians if you should get in an accident. On its own, liability coverage typically costs about $5-$15 per day on average.

Personal Effects – Personal effects is an optional coverage that safeguards your possessions against theft if the vehicle is stolen or broken into by a criminal. The personal effects insurance charge for your rental car is usually less than $5 per day.

Personal Accident Insurance – The personal accident insurance policy provides medical coverage for you and your passengers in the event of an accident. The price tag on this is typically up to $5 per day.

Loss Damage Waiver – The loss damage wavier is the big insurance coverage offered by rental car companies and the one most drivers are familiar having the rental company upselling you. The loss damage wavier is the one coverage rental agents push the hardest on you because it protects you against damage that occurs to the rental vehicle itself. It also protects them. The loss damage wavier is also the most expensive component offered, averaging approximately $10-$20 per day.

Do you need all of these extra car insurances offered by the rental car companies? Maybe. Do you have your own car insurance that covers you while you rent a car? Does the credit card you use to rent the car offer car insurance coverage automatically? Again, the answer is maybe. You should check with your family’s car insurance provider and your credit card company to see what exactly they cover. The insurance coverage offered by credit cards is a great reason that you should use a credit card to rent a car. If you travel for work, your business may cover you or have a deal worked out with their corporate credit card provider to include car insurance for rental cars.

As for your personal effects, your homeowner or renter’s insurance policies may also cover you while you’re renting a car. Like everything, you’ll want to check with your insurance company before you get to the car rental counter. You may also not need additional personal accident insurance if your own health insurance provides coverage.

If you don’t own a car or completely without any other form of insurance, you may want to consider purchasing some or all of these policies that the rental car companies offer.

What Your Insurance Covers

Your decision about whether the insurance offered by car rental companies is worth it depends on the insurance you already have and how much risk you are willing to assume. Here is a list of insurance coverages that many drivers have through their car insurance. You should check with your car insurance provider to see if you’re covered while driving rental cars.

Collision or Comprehensive – If you own a car and have either collision or comprehensive coverage on it, you may not need the loss damage waiver protection for a rental car. Most car insurance policies extend the protection of your car to rental cars. But, like everything, you’ll want to check with your car insurance company before you rent.

Do you see a pattern here? Every case is different. So, be sure to check before you travel.

Liability – The liability coverage protection from your existing car insurance policy typically covers and protects you when you are in a rental car. You may want to consider adding the supplemental coverage if you are only carrying the state minimums required liability coverage on your vehicle.

Health – Unless you are currently without health insurance, your existing policy will cover you everywhere in the United States including while you’re in a rental car. It won’t typically cover passengers and others that you may hurt in an accident though, which is where your own car insurance or the insurance from the rental car company could cover your liability for injuries you cause.

Personal Effects – If you have homeowner’s or renter’s insurance, your insurance company typically covers your personal belongings when you travel. The limits of your protection are not always the same as when you are home though. So, if you are traveling with expensive electronics or jewelry, you may want to consider the supplemental protection that the rental car companies offer.

Be sure to check with your credit card issuers before renting. Like mentioned before, many credit cards include rental car insurance as one of the perks of using their card.

So, is additional rental car insurance that the agent offers you a rip off? No, it’s not. But, it also comes down to how much coverage you already have and how much risk you want to assume.

Another factor that many don’t take into consideration is how easily and quickly returning in your rental car is you purchase the additional rental car insurance and have an issue.

A couple of years ago I rented a car and had a large rock hit my windshield. I normally don’t purchase the additional coverage at the counter. I’m covered by my car insurance and my credit card as well. But, for some reason, I purchased the additional insurance on a whim.

I would have had a lot of paperwork and hassle mediating remedies from my personal car insurance and the rental car company had I not purchased the additional coverage. Because I had the loss damage wavier, I simply handed the clerk at the counter the keys, told him about the damage, and was on my way without a second thought or worry.

So, like everything in life, additional rental car insurance is a trade-off. It’s expensive. But, you are also buying peace of mind. Every situation is different, and every individual’s insurance needs are different as well. Knowing your options can help you save time, money, and headaches down the road.

About the author

Hank Coleman

Hank Coleman is the publisher or the popular personal finance blog, Money Q&A. He’s also a freelance journalist specializing in retirement planning, investing, and personal finance. You can also find him on Twitter @MoneyQandA.

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