Last Updated on January 22, 2025 by Kristin
Nothing befuddles travelers like car rental insurance. How much do you need? Are you already covered? Which products can you skip? Which products should you buy? How much car rental insurance do you really need?
Here is what to consider to make sure you have sufficient coverage for your rental car.
Review the Coverage You Already Have
Before arriving to pick up your rental car, take time to review the coverage already provided by your personal auto insurance policy and/or your credit card. Be sure to find out what the coverage limits are. This will help you avoid buying duplicate coverage or, in some cases, having too little coverage for the vehicle you are renting.
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If you own a car, your personal auto insurance is likely to include primary coverage for car rentals. Many credit cards offer secondary coverage. This means that if you were in an accident, your auto insurance would kick in first. Once your deductible is hit, the auto insurance company would pay out up to the limit of your coverage. Any remaining expenses would then get paid by the insurance benefit offered by your credit card.
A premium credit card might offer primary car rental insurance. Pay with a card like this, and you are covered for the full damages due to collision or theft of most rental cars up to a maximum amount that typically exceeds the total value of the rental car. You must waive the car rental company’s CDW/LDW coverage offered at the counter for these benefits to apply.
Don’t own a car? Your credit card may become your primary insurance provider, though there may be limitations to what is covered. Always check to see what is covered as a travel benefit.
Understand Your Car Rental Insurance Options
Beware the false choice. The agent may ask if you want “basic” or “premium” coverage, implying that these are your only options. But if you own a car, there is another option, which is no coverage.
Ask what types of coverage are available. Every rental car company offers a slightly different menu of options. For example, Hertz offers an optional Loss Damage Waiver (LDW) but also offers products including a Limited Loss Damage Waiver (LLDW), a Partial Loss Damage Waiver (PLDW) and other products such as Personal Accident Insurance (PAI) and Supplemental Liability Insurance (SLI). Note all of the possible options before signing up for any of them, and what they cover.
Understand what each product does and doesn’t cover. For example, CDW does not cover things like damage to other vehicles and property, or certain car components such as tires and mirrors.
If you are renting a car in a different country, you may need to purchase car insurance regardless of whether you own a car or are paying with a credit card that offers coverage. Be sure to research the country’s laws in advance. For example, New Zealand law requires rental car companies to include collision damage coverage as well as third-party liability insurance. However, rental car companies are allowed to set an “excess” (known as a deductible in the U.S.) of up to $2500.
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Consider the type of vehicle you are renting. If you’re renting a car that’s much more valuable than the one you own, your personal auto insurance may not cover you sufficiently. Likewise, some credit cards do not include car rental insurance for electric vehicles.
Calculate the Total Insurance Spend
Understanding how much additional insurance will cost is crucial. While it may be easy to sign up for extra coverage just in case you need it, these charges can add up. A CDW typically costs about $20 to $30 per day, which can add $150 to $200 to a weeklong rental.
You may want to consider alternatves. For example, American Express Premium Car Rental Protection offers AmEx cardholders the option of paying either $19.95 or $24.95 for primary coverage, which applies to damage and theft during the entire rental period. A service such as the Allianz OneTrip Rental Car Protector may also provide these products at a better rate.
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