Renting a car in the Golden State? There’s a car rental insurance gotcha in California that you need to know about.
You may usually decline insurance at the counter because you’re covered by your personal auto insurance policy or a credit card benefit. But when you’re renting a car in California, you may need to rethink this strategy. (Our Primer on Rental Car Insurance explains all.)
Do You Need Rental Car Insurance?
First, let’s have a quick refresher. There are generally two types of car rental insurance: collision damage (CDW) and liability. Each covers a different scenario.
Let’s say you’re in an accident that damages the rental car. In general, you need damage protection (CDW). A new law in California regarding rental car CDW went into effect in January 2022. Rental car companies are able to charge up to $25 per day for over-the-counter collision insurance. (Previously, collision insurance for economy and compact cars were capped at $11 per day, while intermediate, standard, and full-size were capped at $17).
Most credit cards only provide secondary damage protection. In a nutshell, that means coverage only kicks in after the primary coverage limit is hit. If you own a car, your own auto insurance policy is the primary coverage for collision damage.
The second type of insurance is liability coverage. If you’re in an accident that results in bodily harm to other individuals or property damage, your potential liability is huge.
In most states, the rental company must provide the state minimum coverage by law. That means you usually don’t need to buy any extra coverage to meet legal requirements. Still, if you have a personal auto insurance policy, it would normally cover rental cars.
The Insurance Trap with California Car Rentals
Unfortunately, California marches to its own tune. In the Golden State, rental car companies do not automatically provide liability protection in the standard rental agreement. (Some companies may provide primary liability protection to international renters with non-U.S. driver’s licenses.)
This means renters in California need to provide their own liability insurance. In general, U.S. residents may already be covered by their regular auto insurance. But you should confirm that they have the minimum level of liability insurance from their policies. If not, you need to purchase purchase liability insurance through the car rental company.
3 Options for Rental Car Liability Insurance in California
If you’re renting a car in California, you are in one of three camps:
You Already Have Valid Liability Insurance
If you have a valid insurance policy that covers rental cars in California (a personal policy or a non-owners policy), you don’t have to worry about liability since you are already covered.
If you fall into this bucket, you only have to worry if you rent a car that is more valuable than the one you own. Your coverage may be limited to the value of your personal car.
You Don’t Have Insurance and Buy Liability Coverage
If you buy liability coverage from the rental car company, you are covered at least the minimum requirement to operate a car in the state of California.
You Don’t Have Insurance and Don’t Buy Liability Coverage
There’s a Catch-22. Rental car companies do not require liability insurance, but liability insurance is required to legally operate a vehicle in California. Moreover, the rental car company does not need to check that a driver has liability insurance. Nor can a rental car company mandate that a driver purchase insurance. In other words, it’s the renter’s responsibility to comply with California’s law.
A driver can leave the rental car company’s lot without liability insurance. But this would not only be illegal but ridiculously stupid. The cost of this mistake can be huge; a driver without liability insurance who causes an accident is personally responsible for any claims.
Furthermore, if you interact with police for any reason—such as a traffic infraction or accident—driving without liability insurance can land you with fines, points, and/or loss of license. Even as a non-resident in California, it’s your responsibility to read the rental rules. In addition, you should understand the law and protect yourself with liability insurance.
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