Renting a car can be a frustrating process. When you search for prices, they seem very reasonable, but once you add in all the extras, the price is often double the original cost. Then when you pick-up the car, you’re often faced with a dilemma — do I need rental car insurance?
It’s hard understanding whether you need it or not. The rental car companies will often try to convince you that it’s critical to have. Also, many of you have travel credit cards, which often offer a “rental car insurance” benefit. Today we’re going to explore the topic and hopefully give you some things to consider when making a decision on insurance.
Distinguishing between primary and secondary insurance
First off, we need to clarify that not all credit card auto insurance benefits are the same. In order to understand the nuances, we need to discuss the difference between primary and secondary auto insurance. Primary means that it’s the first line of defense when your coverage kicks in. Secondary insurance covers anything beyond the primary insurance. For most people, the primary would be your regular auto insurance policy.
Keep in mind that this only covers the damage to your rental car. If you were to cause an accident and damage another vehicle, then the credit card company would only cover the damage to the rental car and not the other vehicle. You would either have to pay for the coverage using your personal auto insurance or out of pocket.
Since there are so many variations of this scenario, I thought I’d run through a couple just to help illustrate the benefits and risks.
Scenario 1: You have personal auto insurance and you have a credit card with primary coverage
If you were to hit another vehicle while driving your rental car, then your credit card would cover the damage to the rental car. Your personal auto insurance would cover the damage to the other vehicle as well as any damage to your rental car that is in excess of the coverage provided by the credit card. In this situation, you probably don’t need any additional insurance coverage. I, personally, would decline the coverage being sold through the rental car company.
Scenario 2: You have personal auto insurance and you have a credit card with secondary coverage
In a collision, your personal auto insurance would pay for the damage on your rental car and the vehicle you hit. Anything in excess of your coverage on the rental car would be paid by your credit card’s coverage. In this scenario, I personally wouldn’t buy the extra coverage. However, it might be worth it if you’re worried about your insurance premiums going up due to an accident. Also, if you feel like your personal auto insurance is insufficient, then you may want the additional coverage.
Scenario 3: You don’t have personal auto insurance, but you have a credit card with primary coverage
If you caused an accident, then the damage to your rental car would be covered by the credit card, but you would still be liable for the damage to the other car. In this scenario, I would opt for some kind of additional liability coverage.
Scenario 4: You don’t have personal auto insurance, but you have a credit card with secondary coverage
In this situation, your secondary becomes primary since there isn’t another source of coverage. Like the previous scenario, the damage to your rental car would be covered, but you would still be liable for damage to the other vehicle. In this scenario, I would opt for the additional insurance coverage.
Tips and considerations
In addition to these scenarios, here are some extra tips to consider:
1. Consider third-party liability insurance:
Rather than buying insurance from the rental car company, you can now purchase liability-only insurance. This is often sold cheaper than what is offered by the rental car company. This is especially useful if renting for a longer period of time. This also works great if you have rental car insurance benefits on your credit card, but want to add the extra liability coverage. A lot of people now rely on ridesharing and public transport, and may not own a car. This can be a great option to give you additional peace of mind in case you cause an accident.
2. Use your credit card to book the reservation:
If you want to take advantage of your credit card’s insurance coverage, make sure you book the reservation with that card. Otherwise, the credit card company will likely decline your claim.
3. Call your credit card company if you are unsure of your coverage:
There are so many nuances and scenarios, so make sure you get all your answers before your trip. If you’re unsure of your coverage or benefits, I suggest calling your credit card company.
4. Consider that your coverage may be different when traveling internationally:
If you have personal auto insurance, you may want to double check whether your insurance has limits or conditions when renting a car abroad. If so, you may want to get temporary third-party auto insurance that guarantees international coverage.
5. Ensure that your personal auto insurance covers rental cars:
Most policies cover whatever car you are driving, including rental cars. Though if you’re unsure, contact your insurance company to verify the coverage.
6. Bring a copy of your insurance card or documentation when traveling:
In the event that you do get into an accident, you’ll be glad that you have your documents with you. I’ve also had experiences where the rental car rep wanted to see the details of my coverage or policy. It’s helpful to have it with you when picking up your rental car.
I want to emphasize that everyone’s situation is different, and your appetite for risk may be different than mine. When traveling, I tend to be a bit more conservative, as I prefer to have the peace of mind. But your situation might be completely different.
Lastly, if you happen to have an ultra-premium credit card like the American Express Centurion, then you likely have liability coverage as well. I definitely don’t have one (and probably would never qualify for one either), but it’s an additional consideration if you happen to have one of these exclusive cards.
Do you have experiences with rental cars or the coverage provided by credit cards? If so, please share them in the comment section below. Also, if you’re interested in applying for a travel credit card, check out our card offers page.
- “Credit Cards That Offer Primary Car Rental Coverage” (The Points Guy)
- “How Secondary Car Rental Insurance Works for Renters Without Auto Insurance” (The Points Guy)
- “Rental Car Insurance – What You Ought to Know” (State Farm)