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Want to save money on your next vacation?
Consider declining the rental car agency’s collision damage waiver (CDW) or loss damage waiver (LDW) to avoid the daily fee. Instead, use a credit card that offers similar protection for free.
Many credit cards include rental car protection as a free benefit to cardholders. However, the coverage, limits and policies can vary depending on your card. Understanding what’s covered and how the benefit works can help you make an informed decision the next time you step up to a rental car agency counter.
Do you need insurance when renting a car?
Most states in the U.S. require you to have at least some liability coverage if you want to drive a vehicle. Liability coverage helps pay for others’ medical bills and damage to others’ vehicles and property. It can also help pay the fees to defend you during a lawsuit.
If you already have auto insurance, you might be covered when you rent. “Unless expressly stated otherwise in the exclusions list on a policy contract, your auto insurance policy could follow you when you borrow or rent automobiles,” says Neil Richardson, a licensed insurance agent and adviser at auto insurance comparison website The Zebra.
However, he recommends you check your policy or call your insurance agent to verify your coverage. Richardson also adds, “keep in mind that a liability-only policy will not provide physical damage coverage for a rental car.”
In addition to liability coverage, rental car agencies may offer you several other types of protection. The names and coverage rules or limits may vary depending on the rental company, but in general, they fall into these three categories:
- Personal accident coverage. Generally covers medical bills and funeral costs for you and your passengers.
- Personal effects coverage. Generally covers theft of personal property during the rental period. In some cases, the coverage applies to thefts outside the rental vehicle, and it may include the personal property of others traveling with you.
- The CDW or LDW. Although technically not insurance, the loss damage waivers often get offered alongside insurance plans. The CDW or LDW typically covers theft and damage to the rental vehicle — provided the loss or damage was not the result of any prohibited use of the vehicle — similar to a personal policy’s collision and comprehensive coverage. The waiver also covers the rental company’s loss-of-use fees.
Your existing insurance could already cover you in many of these situations. For example, a renters or homeowners insurance policy might cover theft of your personal property, such as the items in your rental car.
Health insurance, auto insurance personal injury protection and life insurance could cover you during a medical emergency or help family members pay for expenses after a death.
If you have comprehensive and collision coverage on your auto insurance policy, your insurance may cover damage to or theft of a rental vehicle. However, Richardson says, “your personal auto policy, even one including comprehensive and collision, likely won’t cover any administrative or ‘loss of use’ fees you may be charged if you damage a rental vehicle.”
When there’s a gap in your insurance, or if you don’t have auto insurance, purchasing coverage from a rental agency could provide you extra protection. Some rental agencies may require you to show proof of insurance or purchase minimum protection from them, although minimum coverage is sometimes included with your rental rate.
Some travelers decide to buy liability insurance from the rental car agency for other reasons. For example, their primary policy’s limits may not be as high as they’d like while driving a rental car. Also, if you buy coverage from the rental agency, a claim might not affect your current insurance premiums.
What might a credit card cover?
Credit cards’ rental car protection may only extend to the CDW or LDW portion of coverage. The benefit helps reimburse you for damage to or theft of the rental car. In some cases, a credit card’s coverage will also pay for loss-of-use, administrative or towing fees incurred by the rental car agency.
To receive the credit card coverage, you may need to:
- Reserve and pay for the rental using the card.
- Be the primary driver on the rental agreement (additional listed drivers may also be covered).
- Decline the rental agency’s CDW or LDW coverage.
Check your card’s policy for other details, such as the maximum rental period (which may be around 30 consecutive days), limitations in different countries, which types of vehicles it covers and coverage limitations.
Also, check to see if your card offers secondary or primary coverage. According to Loretta Worters, vice president of communications for the Insurance Information Institute, most credit cards offer secondary coverage.
This means you may need to file a claim with your insurance company first, and the credit card’s coverage may only reimburse you for claims that your primary insurance doesn’t cover, such as your deductible, administrative fees and costs that exceed your policy’s limit.
Which cards offer car rental insurance?
Most consumer credit cards offer some form of rental car coverage as a benefit. However, Worters says that the benefits can vary widely depending on the issuer and the card, which is why it’s important to review your policy’s details.
For example, the Chase Freedom® car rental CDW benefit provides secondary coverage up to the actual cash value of a vehicle as it was originally manufactured. But Chase Sapphire Reserve® offers cardholders primary coverage and provides reimbursement worth up to $75,000. The benefit for Chase Sapphire Reserve® also covers high-end brands, such as Ferrari, Maserati and Porsche, which the policy for Chase Freedom® excludes.
Note that many cards that offer primary coverage come with an annual fee.
You may not need to buy personal accident coverage or personal effects coverage from the rental car company if you have health insurance and either renters or homeowners insurance. To protect against damage to others’ vehicles or property, you’ll need to either have a personal auto policy that covers you when you’re driving a rental, buy liability coverage from the rental company or see whether your credit card offers something similar to liability coverage.