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How does rental car insurance work, and what does it cover?
If you have ever rented a vehicle, you’ve probably been asked — or perhaps aggressively encouraged — to buy rental car insurance. Unless you have very minimal liability insurance or no car insurance at all, your current car insurance probably extends to a rental car. Even if you don’t have your own auto insurance policy, more affordable rental car insurance alternatives exist. Let’s explore.
Rental car coverage works quite similarly to an average auto insurance policy. Basically, it’s split into protection against damage to your vehicle and damage you cause. Broken out, the coverage looks like this:
Also known as a Collision Damage Waiver (CDW), this coverage mirrors your collision and comprehensive coverage. Here, however, the coverage is simply a waiver which states the rental car company won’t pursue you for damage you cause to the vehicle. So, there isn't a deductible that you would need to pay first.
This will usually extend to a certain amount of damage you cause to other people or their property. A typical limit is $1 million in damages.
If you’re planning on renting a vehicle, the first thing you should do is call your current car insurance company and ask if your coverage extends to a rental car. While it’s not set in stone, many car insurance companies will extend your coverage to a rental vehicle if you carry comprehensive and collision coverage. This isn’t a hard and fast rule, so you should check with your current company before making any assumptions. You’ll also want to check the fine print of your coverage to determine the insurance you need for a rental car.
The big questions you’ll want to ask your current car insurance company regarding rental car insurance:
While we can’t provide definitive answers to these questions, a representative of your company will be able to provide the answers you need.
If your car insurance policy doesn’t provide coverage or you simply don’t want to speak with your company, there's a chance you may have rental car insurance through your credit card. Many credit cards include rental car insurance as a perk. Just like using your personal policy, this comes with some caveats:
While $30 a day for rental car insurance may not seem like a lot, you could be overpaying by purchasing coverage you already have. Before renting a vehicle, review your policy information ahead of time to see if rental car insurance is worth it for you. Ask the important questions mentioned above to see what coverage — if any — applies, and be sure your gaps are covered.
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