Do you need car insurance for a rental vehicle?

If you have ever rented a vehicle, you’ve probably been asked — or perhaps aggressively encouraged — to buy rental car insurance. Unless you carry 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.

Car insurance for a rental vehicle

1. What is it?
2. Is it required?
3. Alternatives

What is rental car insurance coverage?

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:

Loss Damage Waiver (LDW):

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.

Supplementary Liability Protection:

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.

Rental Reimbursement Coverage:

Rental reimbursement is a coverage you can buy through your insurance company which reimburses you if you need a rental car after an accident. The total amount of coverage varies based on your policy. See our in-depth article for more information.

When do you need rental car insurance?

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:

• Will my coverage extend only liability insurance to my vehicle? This is something to really consider if you’re looking at renting a car. With liability insurance, you have no protection to your vehicle if you’re in an at-fault accident. Meaning, you would be liable for any damages you cause to your vehicle without the help of an insurance company.
• Will my insurance company reimburse administrative fees, loss of use, or towing charges?
• Does this provide coverage outside of the US? Some companies provide some insurance coverage into Mexico and Canada, but that might not extend to a rental vehicle. If you’re traveling abroad and will be renting a vehicle, make that clear to your insurance company.
• Does it apply to all vehicle types?
• What are the limits of my liability coverage?
• Is there a time limit on my auto 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.

Rental car insurance alternatives

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:

• Some credit card companies offer coverage only as secondary rental car insurance. The coverage would only kick in after your current coverage has been exhausted. In some cases, credit card rental car insurance only covers your “loss of use” fees: the amount you are charged for the time the rental vehicle spends in the repair shop, unable to be rented out.
• You might need to use that specific credit card to pay for the rental.
• You’ll need to entirely decline the rental company’s CDW or LDW.
• The credit cardholder might need to be the primary driver of the car.

Rental car insurance overview

While $30-a-day rental car insurance may not seem like a substantial investment, you could be overpaying by purchasing coverage you already have. Before renting a vehicle, review your policy information to see if rental car insurance is worth purchasing. Ask the important questions mentioned above to see what coverage — if any — applies, and be sure any coverage gaps are addressed.