Independent Insurance Agent and Risk Manager
Licensed in PA NJ NY MD DE NC TN VA WV

Do I Need Insurance to Rent a Car?

Uncategorized / February 8, 2011

When renting a car, you need insurance. If you have adequate insurance on your own car, including collision and comprehensive, this may be enough, but ask about hidden costs. Prior to renting a car, you should contact your insurance agent to verify how much coverage you have on your own car. Typically, the coverage and deductibles of your own policy will apply to a rental car, as long as it’s used for pleasure and not business. (Renting a car for business in the business name has unique issues that need to be addressed.) If you don’t carry comprehensive and collision coverageon your own car, you will not have this coverage on a rental car if it is stolen or damaged in an accident.

If you don’t have coverage, you will need to buy it from the rental car company. The following options are usually available:

  • A collision damage waiver (also called a loss damage waiver) covers your financial responsibility if your rental car is stolen or damaged. This coverage may not be necessary if you carry comprehensive and collision on your own car.
  • Liability insurance provides excess liability coverage up to $1 million for the duration of the rental period. Rental companies are required to provide state minimum levels of liability insurance, although this is typically not enough coverage for a serious accident. Auto policyholders who carry adequate liability limits, or have an umbrella policy, may forego purchasing this additional coverage. However, if you don’t own a car but rent cars often, you may find purchasing a non-owner liability policy is the most cost-effective option, rather than continually purchasing coverage from the car rental companies.
  • Personal accident insurance provides coverage for you and your passengers for medical or ambulance bills. However, your health insurance or medical insurance under your own auto policy may already provide this coverage.
  • Personal effects coverage protects against theft of personal items in your car. Your homeowner or renter’s insurance may cover these items, though, minus your deductible.

You should also be aware of some potential ‘hidden’ costs not covered by most auto policies if an accident does occur while you are driving a rental vehicle:

  • Administrative fees – any fees associated with the handling of the damaged vehicle’s repair or replacement.
  • Diminishment of value (also known as loss of value or diminution in value or DV) – the difference in the market value of a vehicle without an accident history and the market value of the same vehicle with an accident history.
  • Loss of use – lost revenue the rental car company incurs while the rental car is being fixed; or the cost of a new car if you total the rental vehicle.

In general, it is best to review your rental situation with your insurance agent.  Rental Car contracts are not uniform and make you responsible for a varied amount of items and limits.  When in doubt, take the insurance the rental car company offers.  This will allow you to be able to return a damaged vehicle with less hassle, which is especially important if you have a plane to catch.  Also check your credit card companies, who might offer some additional protection should you use their card to rent the vehicle.