Car Insurance Myth Busters: Do You Need Rental Car Insurance if You Have Car Insurance?

Do you need to buy any/all of the insurances offered when you rent a car? I hear this question a lot. The answer is a definite MAYBE. It is a myth that people with car insurance do not need rental car insurance, because it all depends on the details. Most people will not need the insurances the rental car company is selling, but you may have gaps. It can be a very expensive mistake if you don’t mind the gaps.

Rental car companies will try to sell you the following:

I. COLLISION DAMAGE/LOSS WAIVER – this is not insurance, but a waiver where you transfer liability for damage from you to the rental car company. It covers:

  1. collision;
  2. theft or vandalism; and
  3. loss of use (not all rental car companies include Loss of Use)

YOU: if you have adequate collision and comprehensive on your car, and the car you rent is about the same in value, you are covered for #1 and #2.

Loss of Use is when the rental car company charges you thousands because they cannot use the car you wrecked while it is in the repair shop. This is a gap to watch out for.

Check your credit card to see if their secondary insurance will cover you for loss of use and/or some states automatically include loss of use in your auto insurance (list is here).

II. LIABILITY COVERAGE – Liability means messing up other people’s stuff (bodily damage or property).

YOU: If you have the state mandated minimum of car insurance, your liability insurance covers you for liability in a rental car.

III. PERSONAL EFFECTS COVERAGE– This protects the stuff in your car like cell phones, suitcases and wallets.

YOU: Most homeowners insurance will cover your articles even when they are not in your home. Items may only be covered at cash value not replacement value. Check your homeowners policy.

IV. PERSONAL ACCIDENT INSURANCE – Covers medical bills for you if you have an accident.

YOU: check your car insurance for “medical payments.” You should have it. It comes with your liability insurance usually, but make sure you have it. If so, you’re covered here.

Bottom line: make sure you KNOW YOUR OWN COVERAGE for home, auto and through your credit card. Most people have adequate coverage, but it’s the little details like Loss of Use or special conditions from your credit card company that you should know before you decline coverage. It only takes one short call and it can save you thousands. Otherwise, people who should consider taking rental car insurance are:

  • People who do not have loss of use coverage as part of their credit card or state mandated auto policy.
  • People who own beaters and do not have collision or comprehensive insurance,
  • People who do not own a car.
  • People who do not have adequate homeowners or renters’ insurance.
  • People renting a car outside of the US.

If you are in one of the groups above, you may not need all the insurances offered. Only buy what you need. Do not forget! You have to use the credit card that offers you secondary and loss of use coverage to rent the car in order to be covered by it. Seems, obvious, but thought I’d remind you anyway.