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Rental Car Insurance: Avoid Uncertainty at the Check-In Counter

Whether it's a family vacation or a business trip, when you rent a car make sure you prepare properly to ensure your pocketbook is protected when you hand over the keys. There are a number of insurance options you can access when renting a vehicle, including personal auto policies, coverage provided by your credit card and insurance provided by the rental company itself. Understanding these options, as well as the different risks car renters face, is essential to protecting your finances.   



Most rental company insurance policies only provide coverage for a specified period of time, so returning your vehicle on the date specified in your contract should be part of your trip planning.


Where you rent a car can also be an issue. Some personal insurance policies may not provide coverage for car rentals in certain countries, leaving you exposed. Even more importantly, some policies may exclude specific vehicle types from coverage, making the choice between a four-door sedan and an SUV more than just a matter of taste.


It is bad enough to get into an accident when renting a vehicle, but it's much worse when the person behind the wheel has not been listed as a driver on the rental agreement. In such an instance, coverage may be invalidated and you will have to pay for repairs out of your own pocket.


Theft can ruin any trip, but especially so if you are held liable. Keep in mind that many rental companies will not provide coverage for a stolen vehicle if you leave the keys in the car.


If a rented vehicle incurs damage during a traffic violation, you may find yourself on the hook for repairs. Any time an agreement is made and signed, signees should take extra care to read the fine print. Rental agreements can contain a number of provisions that leave you vulnerable on the road.


First, check your personal auto insurance policies. Most policies will provide coverage for car rentals, but it is better to be safe than sorry. Some policies may have specific provisions regarding the types of rental coverage provided. Also, personal auto insurance policies will not cover "loss of rent" or "loss of use" which is when a rental company loses revenue because it cannot rent out a vehicle that is in the shop being repaired. A rental car company can come after you for lost rent on the vehicle while it is out-of-service.

Additionally, rental companies can demand payment from renters if an accident leads to a vehicle being worth less than it was when you rented it. This is known as "diminution in value".

If you decide to take advantage of collision damage coverage offered by your credit card company when you pay for your vehicle rental with their card, make sure you understand exactly what you are covered for and any provisions that may leave you without coverage. You should also keep in mind that if you opt for a damage waiver from the car rental company, you will not receive any coverage from your credit card company.

In most cases, it is probably wise to invest in a collision damage waiver, or CDW, from the car rental company. CDWs are not the same as insurance; they are simply waivers that say the car rental company will not try to collect a high deductible from a driver if the car they rent is damaged. It is also possible for you to purchase theft/loss insurance along with CDWs, often at a reduced price if purchased together.


Of course, the best way to avoid being liable for an accident in a rental car is to avoid accidents altogether. There are some common sense strategies every driver can use to reduce their chance of liability:

  • Drive carefully at a safe and legal speed while staying focused on the road and surrounding drivers
  • Avoid leaving your vehicle unattended for long periods of time, which can greatly reduce the chance of theft
  • When parking, make sure there is plenty of space between your vehicle and other vehicles, as well as between your vehicle and any construction that might lead to damage