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UPDATED: Mar 13, 2020
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If you travel a lot, you probably find yourself renting vehicles quite often. Even if you’re not a frequent traveler, you may some day need to rent a car for a vacation, business trip or a substitute while your own car is in the shop. Before renting a car, you need to make sure that the vehicle will be protected against an accident. There are three primary ways that a rental car can be insured:
— Through the rental car company
Known as a “collision damage waiver,” this insurance is paid through a security deposit and additional fee added to the cost of the rental. If you return the vehicle without damage, you get your deposit back but lose the additional fees. The damage waiver will generally cost a few dollars a day for the duration of the rental.
— Through your own auto insurance policy
Most insurance policies transfer directly to rental cars that you drive. You don’t have to pay anything extra for this coverage, but you will owe a deductible if the rental car is damaged. You can only protect a rental vehicle using your own insurance if you have full coverage; if you only have a liability policy, you cannot extend coverage to a rental in most states. This does work differently in some states than others, so be sure to check with your insurance company before you rent a vehicle so you’ll know how damages will be handled.
— Through your credit card
Some credit card companies offer rental car insurance as part of its rewards package. The rules will vary from one company to the next. You may or may not owe a deductible, and the credit card company might have a limit to what damages it covers, so you should check with your credit card provider before renting a car to make sure you understand how the protection will work.
If you plan to rent a vehicle for a short time, the cost of the additional insurance may not be a major issue, but a rental you’ll use for several weeks will cost a substantial amount to insure through the rental company. In those cases, using a different type of coverage is ideal.
In a few states, there is no need to buy additional coverages. For example, damage to a rental car in New York is handled through an insurance policy’s liability coverage, not collision. This means you owe no deductible and you don’t need full coverage insurance to take care of a rental car’s damages. In these states, it’s expensive and redundant to take out additional rental car protection.
Depending on where you live and your rental situation, it may make sense to use one type of rental car insurance over another option. Understanding all of your options will help you choose the best way to protect yourself in the event of a claim.
How Credit Card Rental Car Insurance Works
Not all credit cards offer car rental insurance, so you will need to check with the individual card company to make sure. Most major credit cards offer some form of protection, but the coverage may be limited. For example, the credit card may pay for damages to the vehicle you rent but not any other property that you damage while driving the rental car.
In order to use your credit card’s rental coverage, you will need to pay for the rental car with that credit card. This includes both the deposit and the actual rental cost. You will also need to be both the primary cardholder and the renter of the vehicle, so you can’t use another person’s credit card for a car that you rent.
You must also decline the rental company’s protection. In some cases, you may also need to prove that your own car insurance will not cover the loss. Either way, only a single type of insurance can cover your accident, and if you’re found to be covered by multiple insurance companies, they may cancel each other out or deny the claim entirely.
Credit Card Limitations
Although credit cards can offer good car insurance coverage, there are some limitations that you need to know about before you use this option:
— The card may only cover damages to the rental car itself, not any other property involved in the loss. This can cause problems, as your own insurance may not cover the loss if you use your credit card for insurance, so you could be stuck paying for damages out of your own pocket.
— The insurance may only cover the actual cost of repairs, not additional fees. Rental car companies charge processing fees, loss of use costs and other expenses when a claim occurs, and you could be stuck paying for these costs after the claim is settled.
— You may need to file a claim with your insurance company anyway. Some credit cards act as secondary insurance and only pay for damages if your insurance company won’t handle them. This means that you will need to file a claim with your insurer and wait for a denial before the claim can be settled. If the rental car company is sending you a bill, this delay can be very inconvenient.
— There may be addition exclusions depending on where you rent the car, how long you’re in the vehicle, what type of damages will be covered or other things. Some credit cards will only cover losses that happen in the continuous United States, for example, and others cover only collision and theft but will not pay for vandalism or weather-related losses.
You should always ask your credit card company about the rental coverage and read the fine print before you rent a vehicle. You can also call your insurance company to inquire about your coverage and how it will apply to a specific type of loss. By reviewing all of the options available to you, you can make the best choice for your individual needs.