Rental Car Insurance: Is It Necessary?

Your auto insurance is the first policy you should consider when renting a car. This coverage can provide your rental with the same level of protection you’re used to under the same limits and deductibles.

However, your auto insurance coverage can only extend to your rental car if it’s for a personal trip. If you’re driving for business purposes, such as transporting your colleagues to a technical conference, and experience a car accident, you can find yourself in a costly coverage gap where your existing policy no longer insures you.

Your auto insurance can have other coverages folded in, depending on what you selected during your enrollment process, such as liability, collision or comprehensive coverage. These offerings cost more, so check your policy documents to confirm whether you opted in.

Liability coverage can assist you in a car accident that results in bodily injury or property damage to others. Collision will pay for car repair bills resulting from the accident, while comprehensive insurance steps in when you experience car damage caused by non-collision events and animal damage, such as roadway incidents involving deer, acts of nature, theft and vandalism.

Using a credit card to pay for your rental can provide additional protection. While the coverage offered by credit cards kicks in after your auto insurance pays out, they have secondary benefits, such as reimbursing your auto deductible and other costs that your insurance might not cover. Offerings vary depending on the card issuer; check with yours before securing your next rental.

Life, Health and Homeowners Insurance

While not explicitly car-focused, other insurance policies can help in the event of an injury, theft or even death involving a rental car.

The personal property coverage your homeowners insurance provides can assist if someone breaks in and steals items from your rental car. These policies often come with off-premises coverage, meaning you can still enjoy the benefits of this policy while you’re away from home, allowing you to recoup some of your financial losses. Renters insurance can provide the same protection; check with your personal insurance advisor to see if you’re covered.

Life insurance will provide a death benefit to your family following loss of life. Most health insurance, meanwhile, will cover the cost of medical treatment for any injuries you sustain in the accident. If you live in a state where this is not a requirement, your auto insurance carrier likely gave you the option to purchase personal injury protection (PIP). Also known as no-fault insurance, this coverage assists with expenses like medical bills, lost wages due to hospitalization or funeral costs after an accident, regardless of who is at fault.

These policies are standard for many of us. Opting into rental agency insurance offerings can overlap your temporary and pre-existing coverages. If you file a claim using the rental policy only to discover the terms of your existing one are better, you can quickly come to regret the lost money and wasted time.

Popular Options at the Rental Counter

While your insurance policies make a powerful safety net against financial losses and medical bills resulting from injury or damages involving a rental car, the solutions offered by your rental agency can be worth it in certain situations.

For instance, if you don’t want to risk your car insurance costs going up or having to pay a deductible after an accident in a rental, opting in can help you save money. Additionally, if you carry the minimum insurance coverage required by your state or lack optional coverages, such as comprehensive and collision, the insurance offered by rental car companies can be beneficial.

Here are some common rental agency insurance solutions and how they can assist you when renting a vehicle:

• Collision damage waiver (CDW) – Also known as a loss-damage waiver (LDW), this covers rental car repair bills and loss of use charges following an accident, fire, vandalization or covered incident. You'll be on the hook for those costs if you're involved in an accident and found to be at fault or the agency rules the damage or cause is not covered. This does not cover injuries to you, your passengers or others or damage to other cars.
• Supplemental liability insurance (SLI) – Unlike the CDW, SLI covers injuries to other drivers and their vehicles. Consider enrolling if your current auto liability coverage is too low and you lack an umbrella liability insurance policy to help cover the gap.
• Personal accident insurance (PAI) – While SLI protects you from the costs associated with injuries and damage to a third party, PAI provides medical and death benefits for you and your passengers. These benefits are likely already included in your existing insurance policies, but check with your insurance advisor to be sure.
• Personal effects coverage (PEC) – Set by your rental agency at a certain amount, PEC can help reimburse you if your belongings — and those of anyone traveling with you — are damaged or stolen from the vehicle. Coverage and exceptions vary by carrier. Additionally, your existing homeowners or renters insurance can assist in these circumstances.
• Loss of use and gap coverage – There are some circumstances where the rental agency will attempt to recoup their losses following an accident. If the vehicle is damaged and unable to be rented, they can require you keep paying the daily or weekly rental fee while it is repaired. Loss of use coverage will assist in these situations. Gap coverage, meanwhile, steps in if you are held accountable for differences in perceived loss in rental value after an accident. If your auto insurance values a rental car at $9,000 but the rental company states it was worth $12,000, gap coverage can help mitigate the $3,000 difference.

Travel can be stressful, and rental cars provide ease and convenience. With the correct insurance policies, you can ensure you have the proper coverage to protect you in an accident or incident involving a rental car. Additionally, traveling outside the country can apply additional exclusions not covered here. Therefore, contact your Gallagher Personal Insurance advisor to examine your current coverages and determine whether they suit your travel needs inside and outside the country.