If you’ve ever rented a car, chances are you’ve been subjected to a sales pitch advocating the benefits of rental car insurance. The costs of renting a car can quickly add up and you may wonder whether adding on an optional insurance policy makes good financial sense. While rental car insurance is generally not as comprehensive as traditional car insurance, there are some situations where it pays to be covered. Before you turn down coverage, it’s helpful to evaluate some of the pros and cons of rental car insurance to decide if it’s really worth it.
What It Covers
Depending on the company you’re dealing with, you may have several different types of rental car insurance to choose from. Rental car agencies typically offer a loss damage waiver (LDW), which covers the car if it’s damaged or stolen and/or a collision damage waiver (CDW), which covers you if you’re hurt in an accident.
Supplemental liability insurance covers you if you cause injuries or damages to someone else. You may also be offered personal accident coverage, which pays your medical bills and ambulance fees if you’re involved in an accident. Personal effects coverage is also available if you’re worried about your cellphone, laptop or other property being stolen or damaged. Some car rental agencies may also offer accidental death insurance.
Coverage amounts vary from one car rental agency to another and are typically dictated by state law. Each state has different requirements for what constitutes minimum coverage for property damage and injuries. Car rental agencies have the option of offering just the minimum or several different levels of coverage and they may impose daily coverage limits.
Depending on the rental agency, you may not be covered if you drive the car outside of the U.S. or if your reckless behavior causes an accident. If an accident occurs when an unauthorized driver is behind the wheel, you could end up being on the hook for any damages.
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Calculating The Cost
Rental car companies typically charge by the day for rental insurance and in some cases, it may end up costing more than the car rental itself. According to a June 2012 report from U.S. News and World Report, rental car insurance policies can range from $20 to $40 per day, depending on the company and the type of coverage you choose. The upside is that you don’t have to pay a deductible if you need to file a claim using rental car insurance. If your standard card insurance policy carries a high deductible, buying option rental car insurance could potentially save you some money if you get hurt in an accident or the vehicle is damaged or stolen.
Check Your Existing Coverage
Before you head to the rental car counter, check with your insurance company to find out what kind of coverage you already have. Liability insurance protects you if you cause injury or property damage to someone else while collision coverage pays for repairs to your vehicle if you’re involved an accident. Comprehensive coverage protects you if your car is stolen or your vehicle is damaged by hail, falling tree branches, animals or other events outside your control.
Depending on your insurer, your existing coverage may extend to a rental car. Keep in mind, however, that some companies may exempt rental cars altogether or require you to pay a higher deductible. You may also be subject to lower coverage limits for a rental car.
In addition to your car insurance policy, you may be covered if you used plastic to pay for your rental car. Visa, MasterCard, Discover and American Express all offer card members some form of rental insurance and the cost is typically much lower than what the rental car agency charges. For example, American Express charges a flat fee of $24.95 for the entire rental period and there are no deductibles if you have to make a claim. Card holders are covered up to $100,000 against theft and damage, up to $100,000 for accidental death and up to $15,000 for medical expenses. If you don’t have a credit card, you can also check with the company that handles your homeowner’s insurance to see if your policy includes rental car insurance.
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When You Need Car Rental Insurance
Obviously, if you don’t have any primary car insurance or your existing coverage is on the sparse side, purchasing optional car rental insurance can save you some headaches if you get in an accident. You may also need to purchase rental car insurance if your existing policy doesn’t cover you in certain situations. For example, your policy may not cover long-term rentals or if you rent a car for business purposes under your company’s name. Rental car insurance may also be a good idea if you don’t have the cash on hand to pay a large deductible out-of-pocket or you’re worried about your insurance premiums increasing because of an accident.
When considering rental car insurance, it’s important to carefully weigh the costs against the potential benefits. While the coverage can be good in a pinch, you don’t want to end up paying for something you may not need.