You’re standing at the car rental counter, and the agent is giving you his best hard sell. Unfortunately, the insurance package costs more than the rental itself. Do you cross your fingers and decline the coverage? Or do you play it safe and pay for insurance that effectively doubles the cost of your rental car?
Here’s a quick guide to help you cover your bases confidently when renting in the United States.
Car Rental Insurance, the Easy but Expensive Way
In general, the priciest but safest option is the rental company’s Loss Damage Waiver (LDW). This is sometimes called Collision Damage Waiver or CDW).
At $20 to $30 per day, the LDW can feel like a huge rip-off. Some states—most notably California and New York—have laws limiting the price of LDW. But in most of the country, you can expect to pony up double-digit dollars every day.
If you take the LDW and the rental car is stolen or you have an accident, you’re covered. The rental company will waive repair costs, provided that the rental agreement was not violated. An LDW will waive other costs, including loss of use, diminished value, administrative fees, towing charges, and more. These administrative fees can add up quickly, and there is value in not having to worry about them.
Alternatives to Ponying Up for Car Rental Insurance
Paying through the nose for the rental car company’s collision insurance isn’t the only game in town. Here are some other options:
Coverage Through Your Personal Auto Insurance Policy
If you’re risk averse, it can be easy to default to the rental company’s LDW. But consider that you may already be covered. If you have personal auto insurance, the policy will usually cover rental cars. Check with your insurance provider. If your policy extends to rental cards, then a LDW would duplicate coverage.
On the other hand, if you get in an accident after declining the LDW, you’ll have to pay the deductible. In addition, filing a claim might drive up your insurance premium.
Coverage Through Your Credit Card
Many premium credit cards provide car rental insurance if you pay for the rental with that card. It’s important to realize that not all coverage is created equal.
Most cards offer “secondary” coverage. This means that the credit card company will only pay out after your personal auto insurance policy has been exhausted. You still have to file a claim with your auto insurance company. Your credit card would pick up only the deductible. (Some credit card policies may include their own deductible.)
Other credit cards provide primary collision coverage. In this case, the credit card provider will pay out without involving your auto insurance company at all. One caveat is that credit cards often have many conditions on when they will pay out. For example, some won’t cover SUVs, vans, or luxury cars. Some exclude rentals in certain countries. Many won’t cover car rentals longer than 15 days. Often extra fees such as loss of use, diminished value, and administrative fees aren’t covered, either. In other words, credit card companies like to stack the deck so they don’t have to pay out.
Premium Coverage from American Express
American Express offers Premium Car Rental Protection for its cardholders. Every time you rent a car, your Amex card is automatically charged a flat $24.95 ($17.95 for California residents).
Unlike most credit cards, American Express’s premium protection is primary coverage. That means it kicks in before your personal auto insurance policy. There’s no deductible to pay, and coverage limits are much higher than a typical credit card policy. Most vehicles are covered, and you can be covered for up to 42 consecutive days for a single $24.95 fee.
Amex’s Premium Protection is also more generous than most other cards’ coverage (including even Amex’s own free, secondary coverage). The $24.95 price point covers most rental vehicles up to $100,000. It even covers large SUVs and vans, and Amex has a reputation for good customer service.
On any rental of more than two days, Amex almost certainly beats buying LDW from the rental company. The rental company’s coverage is a daily fee. Amex’s Premium Protection is a single fee regardless of the length of the rental.
You can add primary coverage to any Amex card you currently own. Even if you have a personal auto insurance policy, the Amex coverage will provide an extra measure of protection. That way, you can keep your insurance company out of the loop should anything happen.
Third-Party Car Rental Insurance Coverage
Other travel insurance companies, including Allianz and Travelguard, also sell policies for half of what most rental companies charge. Often you’ll see these types of policies offered by the major online booking sites.
Don’t Forget Liability Insurance
All of the above cover your rental vehicle. But what about the unfortunate situation where you damage someone else’s vehicle or injure someone? That’s where supplemental liability insurance comes into play.
Happily, rental companies are legally required (except in California) to provide a minimum liability coverage in the basic rate. (Note that it’s secondary to your own insurance in many states.) The bad news is that state minimum coverage requirements are generally pretty low.
State minimums may cover fender benders. But in a more serious accident, you could be sued for more than you’re covered for. That can leave you financially exposed if you don’t have an auto insurance policy that’ll step up to the plate. Between property damage and expensive hospital bills, a large accident can total up thousands of dollars in losses.
At the rental counter desk, you can opt for Supplemental Liability Coverage (SLI or SLP). For a fee of $10 to $15 per day, SLI will supplement the state-mandated coverage, typically up to $1 million. Your own personal auto coverage is on top of what the rental company offers as standard. If you don’t have a personal auto policy, or you want the extra protection, then SLI may make sense.
The Challenge of Finding Other Liability Insurance Providers
It’s practically unheard of for a credit card to include liability coverage. Travel insurance and third-party rental car collision insurance products don’t generally offer it, either. Even American Express’s fancy Premium Car Rental Protection doesn’t touch liability, only damage to the rental car.
If you don’t own a car (or your car liability insurance doesn’t extend to rental cars), you’re limited to a non-owner policy. It’s tough to find an insurance carrier that will issue these. Some names we’ve heard mentioned in the industry are GEICO, Progressive, and Allied Insurance. An independent insurance agent may be able to shop around and help you find the best policy and rates. We’ve heard good things about New York-based Campbell Solberg, which appears to be very familiar with non-owner policies.
If you live in Europe, there are lots of good deals on bundled rental car insurance. Some Europe-based travel agencies like Expedia UK offer all-inclusive rates with insurance (both LDW and SLI) at discounted prices. For Europeans who’d like to take advantage of AutoSlash’s discounted rates, companies like Insurance4CarHire.com sell policies in the US.