Do I need rental car insurance?

Protection comes in many forms

The conundrum for many consumers renting cars is whether to buy supplemental insurance. Upon pickup, an attendant will likely ask whether you’d like to purchase some form of liability coverage for an extra cost per day. The price effectively goes from $150 to $300 in a matter of seconds. In the back of your mind you know it’s the right thing to do. But you could be spending double for one simple reason: You don’t know that you’re already covered.

We always advocate for the best and most comprehensive form of insurance money can buy. That said protection comes in many different forms. It doesn’t always depend on what companies like Avis or Enterprise try to offer (or more accurately, sell). Below we include three different forms of protection (including rental protection) and how they work. This isn’t to suggest you should save as much money as possible. Instead, we hope to educate readers about what types of coverage exist and why you should take time to understand them.

Your auto insurance policy

Many insurance companies factor rental coverage into their contracts, which can be a nice incentive for those who travel on a regular basis. But it depends on the type of package you choose to buy. The caveat: knowing what and whom your policy covers under different circumstances.

Three primary forms of coverage provided by your insurance company: liability coverage, comprehensive coverage, and collision coverage. Each protects you in different ways, but favoring one more than another puts you at greater risk. That’s because the extent of your coverage depends on the nature of the crash. For example, liability coverage covers another person’s medical bills and property damage if you happen to be responsible for the accident. By contrast, collision coverage is designed to take care of your own bills and damage.

What to do: Discuss your insurance coverage with a representative over the phone or in-person. Have your rep outline what your contract stipulates and how you’re covered under the guidelines of the agreement.

Your credit card policy

Most credit card companies offer some form of consumer protection, including minimum liability coverage for rental agreements. We’re not suggesting that simply owning a credit card guarantees you complete coverage. In fact, coverage often depends on the credit card company and the policies they choose to enforce. An American Express Gold Member may have better coverage than a standard Discover Card as it pertains to annual fees, etc. The big thing to know in this case is that credit card liability coverage is minimal compared to your personal auto insurance policy and what rental companies offer.

What to do: Contact your credit card company by calling the number listed on the back. A representative can provide a written document outlining terms and conditions in greater detail.

Rental insurance

Rental companies typically offer at least four forms of insurance coverage: Liability, Collision, Personal Effects, and Personal Accident. As we lay out above, liability and collision take care of different aspects of a crash if you happen to be responsible. But rental insurance differs from standard coverage in the sense that rental coverage is designed to protect their property, less so the driver.

What to do: Do a little advance research online and understand the definitions of what the rental provider offers. Rental carriers are less concerned with explaining the nuances of their protection packages as they are with selling them. Ultimately, the idea is to get you to buy; you shouldn’t expect them to cover everything in concise detail.