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The Road Leads to Adventure. What You Need to Know About Rental Car Insurance

   Road to Relaxation Volcano Hawaii

The road leads to adventure, get ready for the ride.

 One of the things we don't often think about until we hit our destination is the rental car insurance.  How many times have you arrived at your destination, gone to the rental car counter and then been struck with all the extras you need to add onto your contract?

Do you even need these things? Is it really covered by your Visa or Amex? What about your home or car insurance?  This is a you really want to worry about insurance now? Here are some tips to give you a head start.

Travelling and your Rental Car Insurance.

When you rent a vehicle you have three possibilities of where to take your insurance:

  •  Your Credit Card
  •  Your Personal Automobile and/or Property Insurance.  In some cases your Travel Insurance provides coverage for a small portion of the “optional insurance coverages” offered by the rental agency- like personal items.
  • The Car Rental Agency

 When it comes to various rental car insurance options, you may be surprised to find out exactly what is or isn't covered. Never take this for granted because your credit card may not always have your back and you can't assume your personal insurance is ready to go either.  You need to be aware of the specifications for each of these coverages and where they may limit you.  Best of all, by knowing the options and requirements, you may just save your money on the rental.

Tropical Drive Vacation Travel Hawaii

Although all insurance policies and contracts /regulations vary from province to province and state to state, here is a general overview that will help you get on the right track.  Remember, in whatever option you choose, call the provider and cross check this information against their specific policies and requirements. These are some tools to help  guide you.

Where can I get coverage and what are the differences in my options?

In my opinion, hands down, the least expensive full coverage option will be the one coming from your personal home or car insurer. Let's look at the details and you can decide for yourself:

Option 1: Your Credit Card
Your credit card may provide collision damage coverage on automobiles that you rent. Not all credit cards offer this, but some do.  Even if they do offer it to you there are certain limitations which you must check with your credit card provider to learn about .

For example: In our research we have found that the credit card companies do not cover liability for the vehicle – which means if you are held liable for personal injuries or damage to property while you operate the rental vehicle, your credit card coverage will not cover you. This is critically important to consider.  You need liability insurance.

In addition credit card companies have limitations in regard to type and value of vehicles they insure. Some credit card companies, for example, will not insure an SUV or vehicles valued over $65,000. 

We have also seen that some credit card companies restrict who they will provide coverage to based on age.  Please contact your credit card company to find out.

Additional Advice:
Check with your credit card company to see if the coverage includes any other drivers. Also, ask if there are any limitations in term of time period, territory in which the car is driven, or anything else that may affect your coverage.

Option 2: Your Current Auto Insurance Policy

Through your personal automobile insurance policy, you may obtain coverage for Legal Liability for Damage to Non-Owned Automobiles . This is an endorsement that can be added to your existing policy and is often included as part of a package with many of the major insurers. The cost for the endorsement varies, but averages between $30 and $50 per year-a substantial savings over rental company daily rates.


Contact your insurance representative to purchase the Legal Liability for Damage to Non-Owned Automobiles clause to your policy. Although this coverage does have some limitations which vary by insurer, they usually provide coverage for you that would replace the optional coverages offered by the rental agency for a fraction of the cost. Daily rate at rental agency is usually about $20-40 , annual rate with your insurer is usually $30-40. Your insurance representative would likely have the most complete and best solution to meet your needs.

Here are some tips and information to help you understand what your car rental company offers:


Option 3: The Car Rental Agency.

The advantage of taking the coverage with the car rental agency is that it allows you to purchase full coverage without having any penalties on your auto insurance policy in the future, should you end up having to make a claim. This is especially convenient if you already have claims on your personal policy. Taking your insurance with the rental agency can avoid penalties on your personal insurance if you do have an incident.

It is also convenient if your current automobile insurance policy does not cover collision - this is common with older vehicles where people buy "one way" coverage. (If you don't have coverage on your main car, then coverage for collision  could not extend to a rental vehicle).

Buying the coverage from the rental agency is a very convenient option, however this convenience comes at a high cost, often between $20-45 per day.

 The car rental agency will offer you several choices of insurance:

  • Loss Damage Waiver/Collision Damage: This covers all costs you might incur if the rental car is damaged or stolen. It also pays "loss of use" fees to the rental company - the money lost by the company when the car is being fixed and thus can't be rented. This is not actually insurance, instead it is a legal provision saying that the rental company agrees to waive any financial claims against you for damage.  
  •  Personal Effects Coverage – This protects your personal effects in the vehicle in case of theft. If you have homeowner or tenant insurance, then your personal items may be covered under your home policy. However if you make a claim on your home policy, your claim is subject to a deductible. The coverage is also likely covered as part of your travel insurance.

This coverage costs on average a few dollars a day, this is something you may want to consider given the low cost. First, contact your personal insurance representative to see if you have coverage already and use this information to make the best decision.

  • Supplemental Liability Protection -  This protects you and other authorized drivers if you injure or kill someone or damage their property as a result of your use or leasing of the vehicle.

Although this coverage is referred to as supplemental, if you are taking the insurance solely through the car rental agency, we recommend you take this increased amount, any amount below $1,000,000 is not sufficient to cover the potential risks involved in a serious accident, especially when driving in the United States.

Note that if you take the coverage through your insurance provider (your personal automobile policy, or an excess liability clause on your homeowner policy) then this coverage is not required – contact your insurance representative in advance to find out how you are covered.

  • Personal Accident Insurance: PAI provides accidental death benefits and emergency medical expense benefits to the renter. This may also extend to passengers in the vehicle depending on the rental company. This is life and medical insurance for everyone in the rental car. If you purchased health or life insurance for your trip, you may not need this coverage if you have this coverage elsewhere. Inform yourself before renting the vehicle .

Highway Costal Drive Ocean View Winding Road

Some additional questions to ask when arranging rental insurance so you can enjoy that winding road, worry free.

Credit Card Companies:

  • Check with your credit card company to see if the coverage includes any other drivers.
  •  Ask if there are any limitations in terms of time period (how many days maximum), territory in which the car is driven, age, or anything else that may affect your coverage.

Insurance Providers:

Ask your insurance agent whether your personal auto policy covers a rental car. 

  • Ask if there are any limitations in regards to who can drive the vehicle, what the liability limit covered is, and if there is a limit to the value of the vehicle or type of vehicle they are willing to cover.
  • Ask if there are limits to territory, for example: Canada, USA and/or Europe. Mexico is usually excluded on ALL insurance policies since the government handles the insurance in Mexico. Make sure to inquire about special conditions if you are travelling to Mexico.
  • If your personal auto policy doesn't provide rental car coverage, ask the cost of adding a rental insurance rider.

Insurance is the last thing that you want to think about when travelling, hopefully with this information, you can cut your time at the rental counter, put a little savings in your pocket & enjoy the flight. 

Sun in the clouds 

You'll be on that road in no time...





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