Does Auto Insurance Cover Rental Cars?

Renting a car isn’t always cheap. The average price for car and truck rentals reached over $226 in 2021, according to data from the Bureau of Labor Statistics. Prices have been gradually declining, but adding rental car insurance at the checkout counter is another expense — and you might not need it. Your personal auto insurance policy could provide all the coverage you need. Let’s unpack the details and also take a look at how rental car insurance works.

Does personal car insurance cover rental cars?

The short answer is: usually. If you have personal car insurance and get into an accident while driving a rental car, your policy will likely cover you as if you were driving your own vehicle. Auto insurance typically covers the car, not the driver, but there are some exceptions. Renting a car is usually one of them. Just keep in mind that every insurer and policy are different, so you’ll want to read the fine print to clarify what’s covered and what isn’t. Luxury vehicles, for example, may be off limits. In some cases, your insurance plan may not be valid in certain countries.

If your auto insurance policy will cover you in a rental car, your regular coverage limits and deductible will apply. However, your policy might not offer the coverage you need for a rental car. For example, if you don’t carry comprehensive coverage, you’ll be on your own if your rental car is stolen, vandalized, or damaged. Adding rental car insurance can help bridge the gap.

How does rental car insurance work?

Car rental companies typically sell coverage of their own. According to the Insurance Information Institute, that may include:

• Loss damage waiver (LDW)/collision damage waiver (CDW): This technically isn’t insurance. If your rental car is stolen or damaged, an LDW or CDW will waive your financial responsibility. They might also cover you if the rental company charges additional fees while the car is being repaired. There tend to be limits, though. For example, these types of waivers may not apply if you’re driving on unpaved roads. The same goes if you’re speeding or intoxicated.
• Liability coverage: Rental car companies are required to offer enough liability insurance to meet their state’s requirements. Your personal auto insurance policy may be sufficient, but those who don’t have their own policy may want to purchase liability coverage.
• Personal accident insurance: Check to see if medical payments or personal injury protection (PIP) are included in your auto policy. Both cover medical bills if you or your passengers are hurt during an accident, no matter who’s at fault. Personal accident insurance works in a similar way.
• Personal effects coverage: If you have homeowners or renters insurance, you might not need personal effects coverage. This type of coverage kicks in if personal items are stolen from a rental car.

How to decide if you need rental car insurance

You may not need rental car insurance if you already have a standalone auto insurance policy. If that’s the case, consider the following:

• Do your coverage limits and deductible feel adequate?
• Does your policy cover rental cars? Are there any exceptions?
• Would purchasing additional coverage from the car rental company make you more comfortable?

If you don’t own a car (and don’t have auto insurance), car rental insurance might make sense. Certain credit cards also offer coverage if you use your card to pay for the rental car. This may not be very robust, but it could provide some financial relief if the unexpected happens. Credit card coverage usually applies after you’ve used your personal auto insurance policy or car rental insurance coverage.

Whether or not you need rental car insurance will depend on your situation. If you decide that your individual policy is enough, keep in mind that your premiums may increase if you file a claim. That might be a worthwhile trade-off in the event of an accident or theft. 

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