Is rental car insurance good to have or just a scam?

Note: This article may have affiliate links to Amazon or other companies. Purchases through these links may earn us a small commission at no additional cost to you. Learn more here.

They always ask me at the rental car counter if I want the high-priced daily insurance, and I’ve always said no, since I have coverage through my personal auto insurance policy. But there has to be a point to them offering extra insurance — it can’t just be a scam, right?  Why should (or should I not) buy the extra rental car insurance?

  1. Is rental car insurance good to have or just a scam?

    Rental car insurance runaround

    You’ve finally gotten off the plane, picked your bag out of the 150 identical pieces of luggage on the carousel, and slogged your way over to the rental car counter. It’s late, you’re tired, and the last thing you want to have to do at this point is think any more than is absolutely required to get to your hotel and to take a shower.

    And then that darn guy behind the rental counter asks you the question: “Do you want to purchase the additional insurance today?”

    *sound of gears grinding*

    Well? Do you?

    The $20/day question

    Well… the answer is it depends.

    First, let’s examine what you get when you purchase the rental car insurance — which usually isn’t actually insurance, it’s a liability waiver. It’s generally called a Loss Damage Waiver (LDW) or the Collision Damage Waiver (CDW). (There is also something called Personal Accident Insurance, or PAI, which specifically covers passengers — not the vehicle.)

    When you spend that extra couple bucks a day, if you get t-boned by some schmuck not paying attention, it’s not your problem, put simply. The rental agency holds you harmless if you get in an accident, or if the car is stolen or damaged. You don’t pay anything else, your insurance company doesn’t get involved, and you walk away with (pretty much) no strings attached. It’s convenient.

    Here’s how three major car rental agencies explain their policies:

    Is the LDW/CDW worth the cost?

    So why wouldn’t you spring for the waiver insurance?

    Well, let’s say it’s $12/day (a pretty conservative figure). You have a 5-day rental. So that means that right there is another $60 on top of whatever you’re already paying in rental fees.

    “So what?” you say. “My personal auto insurance also covers rental cars.”

    That’s right, it certainly does. Of course, if something happens, you’re out the cost of the deductible on your insurance (which is probably a tad more than $60), your rates will most likely go up, and here’s the biggie — rental car companies can charge you for “loss of use,” which means the loss of rental fees while the car is in the shop for repairs. In many states, personal auto insurance policies will not cover this expense — you will be out of pocket for it.

    Check out what three top insurance companies had to say:

    Put it on the plastic?

    “Well,” you say, “my credit card has some coverage on it.”

    You’re right — your credit card probably does offer some insurance coverage… but that’s mostly on a secondary basis — meaning your auto insurance company pays first, then you can submit a claim to your credit card company to pay for the deductible and possibly for “loss of use” charges. But do read the fine print on your credit card coverage here — not all cards are created equal, and some provide very little additional coverage.

    Some info from the major credit/charge/debit card companies:

    Going international?

    A final consideration is where you plan on renting the car. If you’re overseas — or even just in Canada or Mexico — your auto insurance provider may not offer any coverage whatsoever. It would be rather a downer to rear end someone in Paris while sightseeing, then come home to a $10,000 bill for a wrecked rental.

    Property values

    Most rental companies also offer personal property insurance in addition to the liability waiver — meaning that if your iPad gets stolen, you’ll get reimbursed. Again, yes, your auto or homeowners policy may cover this type of theft, but, once more, consider the deductible (and the hassle). Once you’ve thought about how much your deductible is, consider how much more likely items are to be stolen while on vacation — especially if you’re in a tourist-heavy area.

    The bottom line

    Before you go off on a trip that requires a rental car, call up your insurance company and your credit card company. Get in writing exactly what they cover, and what they don’t. If you feel good about with the amount of coverage afforded to you via this route, go ahead and save the money at the counter.

    If you don’t feel comfortable with what you’ve got, you just don’t want to deal with the possible hassle of having to call the insurance, the credit card company, and the rental agent multiple times if something happens, or you just haven’t had a chance to look over your policy recently — spend the cash.

    There’s something soothing about the piece of mind of total coverage — not that you should decide to go drive your rental from the Vegas strip into Lake Mead to see if it floats… but knowing you could walk away clean if you do, that’s one less thing to worry about while on vacation.

Comments are closed.