The Nasty Truths About Car Rental Insurance

Page Title: The Nasty Truths of Rental Car Insurance - 2022 Version  -

Meta Description: Learn about some uncovered nasty truths about rental car insurance. Decide which option works better for you and if any coverage you already have is enough

The Nasty Truths About Rental Car Insurance - 2022 Version-

Renting a car is a convenient and practical way to explore a city at your own pace without having to depend on public transport. If you have ever been to a rental agency, you probably have been warned by the agent about the potential consequences of leaving the premises without buying their rental insurance. But, is it necessary to buy rental car insurance? Do you need insurance to rent a car? What coverage do you already have and, is it not enough? And this is exactly what rental companies are counting on, not to mention the commissions they receive for selling you the coverage.

As it is our goal to make things clear and easy to understand for you, we’ll uncover some nasty truths about rental car insurance so that you can decide which option works better for you.

Do You Need Insurance to Rent a Car?

If you are wondering if it is necessary to buy rental car insurance, the most accurate answer we can give you is “it depends”. Even though you don’t need to have your own auto insurance policy to rent a car, the truth is that rental agencies usually have minimal coverage on their vehicles. Thus, if you are involved in an accident, you could be responsible for significant expenses. 

That said, if you want more protection, or if you’re traveling to another state or abroad, you might need to buy rental car insurance.

Collision Damage Waiver (CDW): The Rental Company’s First Choice

The Collision Damage Waiver is the full peace of mind option that you can purchase directly from the rental company. When you buy a rental car damage waiver, the agency surrenders its rights to charge you for any damage to a car rental, although there are a few exceptions and you’d want to read the fine print before committing. But, otherwise, you can return the vehicle as a wreck, hand the keys back and leave.  

No other option is as convenient or comprehensive but you should know that, typically, a rental car collision insurance starts at around $30 per day and it sometimes costs even more than the base car rental rate. 

It’s true that you can always cover major damage responsibility by relying on a third party policy, your own car insurance or a credit card with insurance. But in all these cases you’ll have to pay a damage claim up front and then recover as much as you can by filing a claim afterwards. 

You should also remember that if you don’t buy CDW, rental agencies can charge you for more than just fixing the damage. They may charge you for: 

  • Towing charges, if you can’t drive the car back to the return station.
  • Loss of use: i.e., the potential revenue lost while the car is out of service being fixed.
  • Diminished value: or the potential loss of the car’s resale value.
  • Administrative fees related to the claim process

What is LDW In A Car?

LDW in a car stands for Loss Damage Waiver. Loss Damage Waiver is an option that waives your responsibility to pay for accident damage, a total loss, environmental damage, vandalism and theft. 

It’s similar to a CDW but it protects you against theft, which a CDW doesn’t. Besides, a LDW policy protects you from any fees the agency charges you in case you cause damage to your vehicle and it gets to the repair shop. 

Understanding Rental Car Liability Insurance

According to the law, rental companies have to provide the state-required minimum amount of rental car liability insurance, although there are a few exceptions to this rule and some states require the renter to apply for state minimum liability insurance themselves. As a renter, you should know that coverage often doesn’t provide enough protection.

Since July 2018, new laws require each US state to have a raft of liability insurance in place to cover incidents occurring while driving. Click here to view the details on a state--by-state basis.

Car rental liability insurance covers other drivers’ property damage and injuries resulting from an accident you cause. It’s a policy that is offered by rental agencies but it’s a coverage that usually comes with homeowner, household or tenant insurance and it covers far more than a car rental. 

It’s very likely that your own personal liability insurance will give you the coverage you need, but depending on where you’re going you may want to increase your policy limits.

Besides CDW, what other options do I have?

The Collision Damage Waiver from the rental agency is, fortunately, not the only option you have. Other alternatives you may want to consider are: your own auto insurance policy, using a credit card for coverage or getting a standalone policy through a third party such as us, Let’s look into each of them!

Relying on Auto Insurance With Car Rental Coverage

If you own a car, coverage from your own policy applies as long as your trip is for personal travel and you’re renting within the U.S. or Canada. When using your auto insurance there are no out of pocket expenses. However, most auto insurance policies have a deductible which can be as high as $500 or $1500 depending on the policy you have, which can be pretty painful if you have to make a claim. And to make things a little bit worse, your premium could increase up to 44% if it is your first claim!

  You should also bear in mind that if you don’t have comprehensive and collision on your regular policy or you’re renting in a location where this coverage isn’t in effect, you’d have to pay for the damage unless you buy the LDW. You may also want to consider purchasing supplemental liability insurance  to boost the coverage that your auto insurance offers you already. 

Credit Cards as Car Rental Insurance Coverage

Relying on your credit card for car rental insurance coverage is another option, assuming you used the card to pay for the rental and the rental is in your name. It’s an interesting alternative if you’re renting overseas and your auto insurance won’t offer you protection there. 

Similar to auto insurance, there are no out of pocket expenses with credit cards generally. However, they are always a secondary source of insurance. That is to say, if you are involved in an accident or loss, you’ll still need to claim on your primary auto insurance policy and risk those cons. Additionally, some cards don’t cover hail damage, loss-of use or tire damage. There are a few premium credit cards that do offer primary coverage for rentals, meaning that the card takes full responsibility for the payment but these are exceptions to the rule! 

Third Party Car Rental Insurance

If using your credit card or your own car insurance is not an option for you and purchasing the CDW from the agency is totally off your budget, you should definitely consider buying third party car rental damage insurance. 

Buying your car rental insurance from companies such as Bonzah offers several advantages. To begin with, it’s much more affordable than the policy you could purchase at the agency counter, coming in at under $10 a day and you can even pay less if you purchase the annual car rental insurance policy. Besides, there is a zero deductible, up to $45k in primary coverage and it covers basically any damage reason or loss incurred while driving within the rental conditions.In addition, you can buy supplemental liability insurance online as well.

It is important to consider that third party car rental insurance generally acts as reimbursement insurance. In other words, depending on the amount of the damage, you would be charged by the rental company and the insurance company would refund you those charges. However, if the damage was, for instance, around $3,000, the rental agency would deal directly with the insurance.