Do you Need to Buy Rental Car Insurance?
Rental car insurance can be a tricky thing. The ‘credit card has got you covered’ theory has been thrown around quite a bit, and as a result, I have often declined the optional rental car insurance coverage when traveling. However, your credit card provider might not have you completely covered after all, upon further inspection. A deeper dive in to this point-of-sale decision dilemma is needed. So let’s do it. First, we’ll start with some common terminology to break this down.
What is a Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)
To break this down, you must first know the lingo. When you rent a car and are offered ‘coverage’ or ‘insurance’, you’re offered a CDW/LDW damage waiver. It’s not really an insurance policy, rather you are paying the rental company for them to take responsibility (as they are already insured) in the event of damage or theft, versus passing it along to you.
Liability Insurance vs. CDW
Note that CDW and LDW’s don’t cover liability protection (in the event you harm someone or something and legal action is brought against you). Rental providers charge additional fees for this coverage. If you have a personal auto insurance plan, you’re likely covered on rentals (but you should check to be sure).
Before you rent your next car, you should look into the following:
Does your Personal Auto Insurance Policy Cover Damage/Theft on Rentals?
It just might. Every policy differs, and this is something that you can usually add in. If it does not, that’s where your credit card might come in handy. Credit cards often protect you in the event that you don’t have the coverage via your primary auto insurance. However, if you do have the coverage via your auto insurance, it defaults to them.
Rental Car Insurance Coverage from Credit Cards
Credit card companies do not cover liability, but most do have a CDW/LDW type coverage.
American Express: The American Express car rental coverage page suggests that you can say “No Thanks” when offered CDW or a similar option.
Visa: The Visa car rental coverage agreement states, “When certain terms and conditions are met, the Visa Auto Rental Collision Damage Waiver benefit (“Auto Rental CDW”) provides—at no additional charge—reimbursement for damage due to collision or theft up to the actual cash value of most rental vehicles.” Sounds like you’re covered.
MasterCard: The MasterCard car rental coverage agreement claims, “Mastercard pays for covered damages (physical damage and theft) to a rental vehicle when your eligible MasterCard card is used to initiate and pay for the entire rental transaction.”
Discover: The Discover car rental coverage is a little more precise. It says, “Your Discover Card comes with a Car Rental Insurance Plan that provides $25,000 of secondary collision damage insurance when you rent a car using your Discover Card and decline coverage offered by the rental agency.”
Some Cautions Before Relying on your Credit Card for Damage & Theft Coverage
It might not always make sense to rely on your credit card for CDW coverage. Always take the following precautions:
- Read the fine print. Find out how much your specific card covers, under what rental day lengths, if it covers theft, etc.
- Note that debit cards often do not carry the same coverage.
- You must actually use the credit card you want protection from on the purchase. Makes sense.
- Call the company and file the claim immediately (that day or the next day). All providers have a specified period after which notification and claims are no longer accepted.
Car Rental Insurance Checklist:
Here is how I’m going to approach making sure that I’m covered before my next car rental.
1. I will call my primary insurance provider to:
Find out if liability protection is extended to rentals. If it is not, how much would it cost to add it? Compare this to what rental companies charge and go with the cheaper option.
Find out if collision, other damage, and theft are extended to rentals. Again, if it is not, how much would it cost to add it and would it be better to pay for this than just use my credit card protection?
2. I will see what kind of coverage my credit card provider has.
If it’s not enough and my primary insurance provider doesn’t cover it, that is really the only time I’d need to purchase a CDW. And even then, if this is a business trip, find out if your corporate card has better coverage than your personal.
If you’re covered, decline CDW.
That’s it! A half hour of research or so will go a long ways to easing your mind and saving you some money every time you rent.
Car Rental Discussion:
- Have you ever been in an accident or had a car rental stolen? What happened? Who foot the bill?
- Do you still purchase CDW even if your personal plan or credit card has you covered? Why?