TLDR:
Rental insurance effectively reduces your risks while renting a car. But do you still need to buy it if you have existing primary or secondary car insurance coverage? Yes, if you don’t think your policy limits are adequate, don’t want to pay the deductibles, or don’t want to risk getting a premium hike because of a claim. If you’re a non-owner and don't have your own auto insurance, then rental car insurance is your best friend, especially in case you have an accident while on a rental trip.
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Renting a car is a great way to explore new places, but it also comes with risks.
According to the Bureau of Labor Statistics, around 10 car crashes occur every minute. And while there is no separate data on rental car accidents, it’s reasonable for drivers to expect the same hazards when they’re on the road. Rental car drivers may even be at higher risk considering their lower familiarity with the car and the road environment.
This is where rental car insurance comes in.
It’s important to consider rental car insurance when renting a car. If you’re not insured, you may suffer from huge financial losses if your rental vehicle gets in an accident. Imagine having to pay not only for a wrecked rental car but also for the damage and injuries sustained by the other party. Not to mention your own medical bills if you have no insurance coverage at all.
Rental car companies are aware of this risk. That’s why they often try to convince you to getting either a Collision Damage Waiver (CDW) or their in-house rental car insurance. The CDW isn’t insurance, but it takes responsibility for rental car damage off your hands. In fact, you don’t need these to be able to rent a car. However, you should make sure that you do have adequate protection against unexpected expenses in case something goes wrong.
What Is Rental Car Insurance?
A rental car insurance policy covers the vehicle you are renting, whether it is for a day or a week. It protects you against potential losses arising out of damage, theft, and other unforeseen events while driving a rental.
Rental car insurance is similar to regular auto insurance in that it helps cover the cost of repairs if you get into an accident. Depending on your policy, it can also provide liability coverage in case you injure someone or damage another car or property while you’re driving.
Without rental car insurance, you will have to shoulder any and all expenses due to damage to the rented vehicle. These days, most rental car companies will charge you even for minor dents and scratches, so having insurance coverage can save you from making payments out of pocket.
That said, there are instances when you’re compelled to buy rental car insurance without knowing if you really need it, thereby making it an unnecessary expense. It’s important that you learn whether you’re duplicating your coverage or are missing out on the parts that you actually need to be truly covered.
When do you need rental car insurance?
It can be tempting to skip getting insurance when you only need to rent a car for a short time. After all, there’s a very low probability that you’ll damage the rental car or get into an accident, right?
Probably, but you can’t really be sure.
Car insurance is one of those things that you hope you never have to use but are glad to have if you do. Unless you’re ok with paying for everything on your own in the event that something does happen, then you should think twice before foregoing it.
A smarter move is to learn what kind of coverage you need so you don’t end up paying more than you have to for a policy. To learn if you do or don’t need to buy rental car insurance, you should first be familiar with the concepts of primary and secondary auto insurance coverage:
Primary auto insurance coverage - If you’re a private car owner and/or have a personal car insurance policy, then this policy usually becomes your primary coverage. That is, your auto insurer will likely cover the costs in case of rental car damage up to your insurance policy limits. Some credit cards also offer primary coverage for rental car insurance.
Secondary auto insurance coverage - This is insurance coverage that kicks in after you’ve exhausted your primary auto insurance. If you don’t have personal insurance but have secondary coverage (such as through a credit card or travel insurance), then this becomes your default primary coverage.
With that out of the way, here are different scenarios to help you gauge whether you need rental car insurance to go along with, or independent of, your personal vehicle insurance policy.
Scenario 1: When you don’t have any car insurance at all
If you don’t have any existing auto insurance policy, then you wouldn’t have any primary or secondary coverage. You’re exposed to all of the risks that come with using a rental car. You’ll be responsible for all the damages, including any injuries to yourself or others. You may also be sued by the other driver.
In this scenario, you definitely need to get rental car insurance that provides both damage and liability coverage. For example, if you are a non-owner and don't have your own auto insurance, then rental car insurance is your best friend. This might also apply if you’re driving the car for business rather than personal use since your personal insurer is unlikely to cover you.
Scenario 2: When you have limited primary car insurance and you don’t have secondary coverage
Some people assume that their private automobile insurance policy already covers car rentals, and therefore do not purchase a separate policy. But if your personal car insurance is limited (a.k.a not comprehensive, or has a really low limit) and you have no secondary coverage, you may be responsible for paying the entire cost of damages. If have no liability cover on your existing insurance, you also risk having to shoulder the costs of vehicular damage and personal injury of the other party in an accident where you’re at fault.
This can be a financial burden, so it's important to understand your options. You can either negotiate with your primary insurer to increase your coverage, or you can purchase separate rental car insurance to ensure that you’re adequately covered.
Scenario 3: When you have both primary and secondary car insurance but are driving abroad or don’t want to use it for your rental
If you have a comprehensive personal car insurance policy, it usually includes collision and liability coverage. That coverage may extend to your rental car, as long as you drive it for personal use. The coverage limits and deductibles on your personal policy also apply to your use of a rental car.
However, most personal car insurance policies may not be applicable if you’re driving in another country. In this case, your secondary car insurance or travel insurance (if applicable) becomes your primary coverage.
Also, using your primary car insurance policy to cover an accident may cause your premiums to go up. This is because your insurance company will see you as a higher-risk driver. To avoid this, you might want to use a separate insurance policy to cover your accidents.
Scenario 4: When you only have secondary car insurance coverage
Secondary car insurance coverage is usually provided by a credit card. The policy automatically kicks in when you use the credit card to book and pay for the rental car. If it’s the only policy you have, then it becomes your primary coverage.
It’s important to note that since secondary car insurance is meant to be a backup insurance, it might not offer adequate protection as the only means of insuring your rental vehicle. Also, insurance through a credit card usually covers only damage to your vehicle but doesn’t include liability insurance. So you definitely need another policy that provides at least liability coverage.
What rental car insurance do you need?
Now that you have an idea of what your existing insurance covers (if any), let’s discuss the different types of rental car insurance so you have a clear idea of what you’ll need to get fully covered.
Collision and/or Damage Insurance: This coverage helps pay to repair or replace the rental car if it is damaged in a car wreck or when you collide with another vehicle or object (ie. a tree or fence).
If you’re a car owner and have personal car insurance, its collision or damage coverage most likely extends to your rental car. So you probably don’t need to buy collision or damage insurance if you’re driving a rental car that’s in the same price range as your own.
However, as we’ve noted earlier, your personal car insurance probably won’t cover you while you’re driving abroad. So if you’re renting a car in a foreign country, it’s best to buy rental car insurance for damage or coliision coverage. It’s a good idea to do so even if you’re driving a rental car in the U.S. that is much more expensive than the one you own or simply don’t want to be saddled with the huge deductible on your policy.
Liability Insurance - This coverage helps pay for another person’s medical bills or property damage if you’re found responsible for an accident while driving your rental vehicle.
Most states in the U.S. require a minimum amount of liability insurance. Rental companies have to provide the state-required minimum liability insurance, though there are exceptions to this rule. Note that your rental car is likely to only come with the standard minimum coverage for compliance. You may want to consider purchasing additional insurance coverage (such as supplemental liability insurance) if you’re planning to drive in an area with higher traffic volume, expensive cars, or increased risks.
It’s obviously a different case if you’re driving abroad. Different countries have different laws when it comes to liability coverage for rental cars so it’s important to check with your rental company. Or again, you could simply buy Renter's Contingent Liability Insurance (RCLI) to ensure that you’re adequately covered.
Personal Accident Insurance (PAI) - This coverage helps pay the medical expenses for bodily injuries sustained by you and your passengers. Some policies, such as Bonzah’s Personal Accident Insurance, include accidental death benefits and personal effects coverage.
If you have existing health, life or car insurance policies, then you might not need Personal Accident Insurance. The only exemption is when you’re traveling overseas where these policies may not be applicable. You should get PAI if you don’t have any personal accident coverage or want to make sure that you have adequate protection for accidental medical expense or loss of life.
Rental car insurance for your peace of mind
If you're like most people, you don't give much thought to rental car insurance. You're probably more concerned with things like finding the right car and getting the best rate on your rental. But it's worth taking a few minutes to understand your rental car insurance options. After all, peace of mind is priceless.
Get that covered feeling with Bonzah’s rental car insurance. Get a quote now