What to Look for When Choosing Rental Car Insurance
Start with what your own policy already covers
Before you buy anything from the rental company, check what you already have. Call your auto insurance agent or log into your policy online and ask three specific questions: Does your policy cover rental cars? If yes, what is the deductible? And does it cover damage, theft, or both?
Most standard auto insurance policies do cover rental cars at the same deductible as your own vehicle — often $500 to $1,000. If your policy covers rentals, you may not need to buy the rental company's coverage at all. Some credit cards also cover rental damage if you charge the full rental to that card, though the coverage varies widely by card issuer and by state.
Write down what your policy covers before you arrive at the rental counter. The agent will ask if you want their insurance, and you need to know your answer before the sales pitch starts.
Key Takeaways
- Your own auto insurance likely covers rental cars at your existing deductible, so check your policy before you rent.
- Rental companies offer three main types of coverage — collision damage waiver, liability, and personal effects — and you may already have some of these through your own policy or credit card.
- The rental company's collision damage waiver is the most expensive option they sell and the one most commonly purchased by people who already have coverage elsewhere.
- If you decline all rental company insurance, you are responsible for any damage to the car, even if another driver hits you.
- Read the rental agreement's damage section before you sign, because some companies charge for pre-existing damage you did not cause.
Understand what the rental company is actually selling you
Rental companies offer three separate products, and you can buy any combination of them. The first is Collision Damage Waiver (CDW), which means the company waives its right to charge you for damage to the car. This is the expensive one — typically $15 to $30 per day depending on the car size and location. If you already have collision coverage on your own policy, you do not need this.
The second is Liability coverage, which pays for damage you cause to someone else's property or injuries to another person. Your own auto insurance should cover this. Some states require you to carry liability, and rental companies will not let you leave the lot without it — either from your own policy or theirs.
The third is Personal Effects coverage, which covers your belongings if they are stolen from the car. This is rarely worth buying because your homeowner's or renter's insurance usually covers theft of your possessions anywhere, including a rental car.
Know what the rental agreement says about damage you did not cause
Read the damage section of the rental agreement before you sign. Some companies charge you for pre-existing damage — dents, scratches, or broken parts that were already there when you picked up the car. Others do not, but they will charge you if they claim damage happened on your watch.
Take photos or video of the entire car before you leave the lot, including the undercarriage, wheels, and interior. Photograph any existing damage and send the photos to yourself by email so you have a timestamp. If the company charges you for damage after you return the car, these photos are your proof that you did not cause it.
Some rental companies now use damage-detection technology at pickup and return, which photographs the car automatically. If your company offers this, use it — it removes the he-said-she-said problem entirely.
Decide based on your deductible and your risk tolerance
If your auto insurance deductible is $500 or less, you probably should not buy the rental company's collision coverage. The cost of their CDW for a week-long rental often exceeds what you would pay out of pocket anyway. If your deductible is $1,000 or higher, the math shifts — a week of CDW might cost less than your deductible.
Consider also how comfortable you are with risk. If you are driving in an unfamiliar city with heavy traffic, or if you are an anxious driver, the peace of mind of waiving damage charges might be worth the cost. If you are driving on a quiet highway in good weather, the risk is lower.
Do not buy coverage based on fear. The rental company's sales pitch is designed to make you anxious. You are statistically unlikely to damage the car, and you already have a way to pay for it if you do.
Check whether your credit card covers rentals
Some premium credit cards include rental car damage coverage if you charge the entire rental to that card. Call your credit card issuer and ask whether they cover rental cars, what the coverage limit is, and whether it applies in the country where you are renting.
Credit card coverage usually has a higher deductible than your auto insurance — sometimes $2,500 or more — and it may not cover liability. But if you have no auto insurance or a very high deductible, credit card coverage is better than nothing.
Write down the credit card company's phone number and the coverage details. If you are in an accident, you will need to report it to both the rental company and your credit card issuer.
Understand what happens if you decline everything
If you decline the rental company's collision coverage and you do not have your own auto insurance, you are responsible for any damage to the car. This includes damage caused by another driver, weather, or theft. The rental company will charge you the full repair cost, which can easily exceed $5,000 for major damage.
Some rental companies will not rent to you at all if you decline coverage and have no auto insurance. Others will rent to you but require a large deposit — sometimes $2,000 or more — which they will use to pay for damage if it occurs.
If you have no auto insurance and no credit card coverage, buying the rental company's collision damage waiver is the only way to limit your financial risk.
Read the fine print on what is and is not covered
Rental company insurance has exclusions. Most policies do not cover damage if you were driving under the influence, driving off-road, or racing. They do not cover damage from wear and tear or mechanical failure. They do not cover damage if you lent the car to someone else or if someone not listed on the rental agreement was driving.
Some policies exclude damage from hail, flooding, or other weather events — you would need comprehensive coverage from your own policy to be protected against those. Read the exclusions section of the rental agreement or ask the agent to explain what is not covered.
If you are planning to drive in rough conditions or off paved roads, tell the rental company. Some will not allow it, and others will require you to buy additional coverage.
Frequently Asked Questions
Do I need rental car insurance if I have a credit card that covers rentals?
Not necessarily. Credit card coverage often has a high deductible and may not cover liability, but it can protect you from major damage costs. Call your credit card issuer to understand what they cover before you decline the rental company's insurance. If the credit card deductible is higher than your comfort level, you may want to buy the rental company's coverage anyway.
What if I get in an accident and I declined all insurance?
You are responsible for the repair bill. The rental company will charge your credit card for the full cost of repairs, which can be thousands of dollars. If you have auto insurance, you can file a claim with your own insurer, but you will owe your deductible. If you have no insurance, you pay the full amount.
Does my auto insurance cover a rental car in another country?
Most U.S. auto insurance policies do not cover rentals outside the United States. Call your insurance agent before you travel internationally. If your policy does not cover foreign rentals, you will need to buy the rental company's coverage or find an international rental insurance policy.
Can I buy rental car insurance after I pick up the car?
No. You must decide on coverage before you leave the rental lot. Once you have signed the agreement and driven away, the rental company will not add coverage retroactively. Make your decision at the counter, before you take possession of the car.
What should I do if the rental company charges me for damage I did not cause?
Dispute the charge with your credit card company or insurance company. Provide the photos you took at pickup and any police report if another vehicle was involved. If you have collision coverage through your own insurance or a credit card, report the damage to them and let them handle the dispute with the rental company.