When it comes to paying for a rental car, not all credit cards are created equal. The gold standard are credit cards with primary car rental insurance.
Beyond the welcome bonuses and points, a great credit card can offer protection when things go very wrong. A perk of many cards is car rental insurance coverage that gives you peace of mind when you hit the road.
Here’s what separates run-of-the-mill credit cards from godsend cards.
Primary Coverage vs. Secondary Coverage
The agent at the rental car counter will offer pricey insurance commonly referred to as Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW). In order to decline coverage—thus saving yourself a wad of dough—you should have rental car coverage either through your personal auto insurance or your credit card or both.
Nearly every basic credit card offers secondary rental car coverage, but this coverage has some significant drawbacks. There’s usually a substantial deductible and it may not cover the entire loss of a vehicle or Loss of Use fees if you get in an accident. But more importantly, it kicks in only after your own personal car insurance is depleted. So if you pay with a card that offers secondary insurance, you still need to file a claim with your car insurance company. That can cause your auto insurance premium to go up.
Most secondary policies on credit cards automatically become primary coverage in two common scenarios. The first is if you’re renting a car outside the US and your personal car insurance policy doesn’t cover you in that country. The other is if you don’t own a car and consequently don’t carry personal auto insurance. But always, always double check your card’s coverage so you know for sure before you decline the CDW/LDW coverage.
Many premium credit cards offer primary car rental insurance, which means it kicks in before your personal auto insurance. 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.
Credit Cards That Offer Primary Rental Car Coverage
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More premium cards are offering primary coverage than in the past. Some notable cards on the list are:
- Chase Sapphire Preferred Card
- Chase Sapphire Reserve Card
- Costco Anywhere Visa Business Card by Citi has no annual fee for Costco members and is one of few Citi cards to still offer car rental insurance and other travel benefits.
- United MileagePlus Explorer Card
- United MileagePlus Club Card
- Ritz-Carlton Visa Infinite Card
- J.P. Morgan Reserve Card
- American Express cards offer primary coverage for a flat rate of $19.95 or $24.95 for rentals of up to 42 days (up to 30 days for Washington State residents). The more expensive option has higher thresholds for medical expenses. You must proactively enroll for this option. You won’t be charged anything until you actually use an enrolled card to rent a car, in which case the premium will automatically post to your account. Note that this coverage does not include car rentals in Australia, Ireland, Israel, Italy, Jamaica and New Zealand.
- USAA co-branded cards often offer primary rental car insurance. These cards are only available to military officers, enlisted personnel and veterans and their eligible family members.
Note that many business credit cards also offer rental car insurance but only if the rental is for business use.
Caveats When Relying on Credit Card Rental Car Coverage
There are a few important exceptions to car rental coverage from a credit card that you should know about.
- It almost never includes liability insurance. Whether your card offers primary or secondary coverage, it applies to damage to the rental car but not to damage you might cause to other cars or necessary medical treatment for you, your passengers or pedestrians. Most states require car rental companies to include minimum liability coverage in their rates, though it’s usually not enough to cover a major accident. You can consider over-the-counter liability coverage or Personal Accident Insurance or your own health insurance policy may also kick in here.
- It won’t cover any and all types of cars. Stick to the normal categories of car (compact through full-size), and you’re covered. But choose a luxury car, passenger van or specialty vehicle and you need to buy the CDW/LDW at the counter.
- It typically will only cover you for a month. If you’re renting a car for less than 30 days, the typical limit, you’ll be covered. But if you need a car for an extended period, you may need to consider options for long-term car rental insurance.
- It may not apply overseas. Every card has a list of excluded countries, which varies from issuer to issuer. But the most common exceptions are Australia, Israel, Italy, Ireland, Jamaica and New Zealand.
When you choose a credit card, weigh the annual fee against the money you will save through benefits when you travel.
It’s important that you know what kind of rental car insurance your credit card offers before you get to the counter. When in doubt, give a quick call to the customer service number on the back of your card.