Types of Rental Car Insurance

Recently I’ve received a bunch of questions about insurance and rental cars.  Today I wanted to explore everything you need to know about rental car insurance.

This post is a natural offshoot of our piece a few months ago on rental cars and the Takata airbag recall.  Many of our readers have been asking about what type of insurance is needed to cover the extended rental car.  That being said I was also thinking the information would be useful for frequent travelers.

Your Normal Car Insurance Covers Most Domestic Rental Cars

So let’s start with the basics.  If you are renting a car in the United States as a US resident then most likely your normal car insurance will cover you.  There sometimes are exceptions for length of rental, particularly if you rent for longer then 30 days.    In the case of the Takata recall extended rental many companies are writing the rental period for 30 days to get around this issue.  Furthermore, some insurance companies have waived this requirement for this specific situation for the PR opportunity.  Your mileage may vary so check with your insurer.

Rental Car Insurance from a Rental Car Company is Largely Redundant Domestically

Should you encounter an issue in a rental car your insurance will charge you your normal deductible.  They will cover the liability and damage.  Full Stop.      So under normal circumstances there is no reason to get rental car agency insurance while renting a car in the US as a US resident with their own car insurance.  There can also be exceptions if you rent something like a moving van, so it’s always best to check your policy first.  It’s important to note, as with any accident, your rates may increase.

International Rental Car Insurance

But what if you travel abroad?  Well, your car insurance is typically not effective outside the US.  Some policies cover Mexico or Canada, but that is about it.  Again check with your insurer but don’t count on your insurance to cover you when traveling abroad.

Credit Card Insurance

This is where things get interesting.  Another way people typically insure their cars during travel is via credit cards.  Many credit cards provide insurance for rental cars.  Note the word cars as again many don’t cover things like moving vans or exotic cars.  Always check with your insurer.

Secondary Insurance

Provided you get a covered vehicle it is important to understand typically this insurance is secondary.  This means  if we return to the domestic accident example  your car insurance pays in an accident and the credit card insurance pays the deductible.    If you were to buy the rental car insurance from the rental car company then it would be behind even that, only paying the pass through they provide.      In other words you don’t want duplicate insurance coverage.

Are you covered for Liability?

The importance of understanding your credit card rental car insurance doesn’t end there though.    Typically the credit card insurance only covers damage to the vehicle you are driving, known as Collision Damage Waiver or CDW.   It will usually not cover damage to vehicles you may hit, known as Personal Accident Insurance.  It also won’t cover liability from an accident.  Travel Insurance companies sometimes offer rental car plans offering to cover liability, but you are not getting them through normal credit card rental policies.

This means if you don’t have your own car insurance or you are traveling where it is not in effect a credit card rental car insurance is not sufficient on its own.  If you have your own car insurance and are traveling domestic you are probably all set, but traveling to a foreign country you need some sort of liability coverage.

Rental Car Liability Insurance Options

Many countries, but not all, require the rental car agency to charge foreigners a mandatory liability insurance charge.  For those that do not, you should see what you can purchase directly from the rental car agency.    These are typically called Supplemental Liability Insurance, or SLI. While you probably still shouldn’t purchase the Collision Damage Waiver or other damage to their car insurance, it is in your best interest to get liability.  If you were to get in an accident and get sued you want to at least have some coverage to hire a lawyer. 

Pay close attention to the limits of payout and deductible in this area and ensure you can afford them.  Do your research before you arrive to determine if such an option is included.  Explore optional coverage as well and how much it costs.   But either way you should have some liability insurance while driving any car.

Our Recent Experience with Rental Car Insurance

Now with all the above said, it’s time for a personal example before we close this one out.  We recently completed a ten day trip to Iceland.  What I failed to mention during that post is our rental car encountered a bit of a mishap, a stone chip in the window.  This is honestly the first non-business rental I’ve ever had an “accident” in.    A stone chip came up from the other side of the road on the way back into Reykjavik and cracked the windshield.  They only replace windshields in Iceland, not repair them, so it wasn’t a cheap issue.

No CDW, Credit Card Rental Car Insurance

For this particular rental car I took the standard government mandatory liability insurance.   Thankfully I had no need for the liability for a stone chip. I did not take the rental car Collision Damage Waiver.  I did however pay with my American Express Platinum Card.  Ultimately since I had no other collision insurance on the car Amex was second to no other insurance.  I prepaid the windshield replacement on my way out of Reykjavik and Amex had me reimbursed for the prepay in full before the card even came due.  Was it as easy as filing a claim with my normal insurance?  Well not quite.

The Process of Filing a Credit Card Insurance Claim

There are quite  a few forms to fill out and upload.  From a picture of the accident, to the rental car estimated repair bill, to the incident report, and finally to a copy of your own insurance to prove it won’t work in Iceland (Well duh).  Anyway, for many of these they depend on the Rental Car Agency to provide the forms, which seems like a recipe for disaster.  The car agency has no incentive to provide it after you’ve paid them.  In my case I was prepared for this.  Before leaving Iceland I took pictures of all damage and all paperwork.  So when requested I provided all the information myself.  It really sped up the process.  I would recommend if you ever need to use your credit card rental car insurance you do so as well.

Do you have any additional questions about insuring a rental car?  Do you always ensure you have auto liability insurance when driving abroad?