Which insurance most car renters can just say no to
Deciding whether to sign up for insurance at the car rental counter can be confusing. No one wants to be stuck with a big bill after an accident. But spending $20 or more each day for protection can be a waste of money.
If you do a little legwork before you leave home, you might just discover that between your current car insurance policy and your credit card company you already have all the coverage you need. Rental companies typically offer expensive insurance for all the risks car renters face. Here is how to protect yourself without breaking the bank.
Loss damage waiver, yes or no?
If you damage the vehicle, you have to pay for the repairs. You'll also be on the hook for the earnings the company misses out on while the car is in the shop. Rental companies will try to sell you a loss damage waiver, which covers damage to the vehicle and the revenue lost during the repair. There's a good chance you don't need to buy their coverage. How to tell:
• Check your current car insurance policy. According to GEICO, “If you’re renting a car of similar value to your personal car, in all likelihood the insurance coverages will be adequate for the rental.” Pay close attention to the coverage limits, especially if you are renting a more expensive vehicle or you have minimal auto insurance coverage.
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• Next, check to see if your credit card offers a rental car insurance benefit. Most cards offer secondary insurance, which means you have to make a claim to your primary insurance company first. The credit card typically picks up where your primary insurer stops. For example, your card could cover your deductible as well as any fees the rental car company charges. Many primary auto insurance policies may not cover things like loss of use or rental car administrative fees, which can make the credit card policy especially valuable.
• Consider your credit card choices. If you rent cars often, you might want a credit card that offers primary auto insurance. You can find a list of such cards at MileCards or ThePointsGuy. With these cards you can avoid the risk of a car insurance premium hike, because you wouldn't even file a claim with your insurer. And it makes the claims process much less painful.
• Watch out for exclusions. Read the fine print of both your insurance and your credit card policies. Many don't cover business rentals or the rental company's lost revenue. In addition, overseas travel can be a problem. Although policies are valid in many countries, check in advance to make sure you aren’t surprised. For example, Ireland, Israel and Jamaica are often excluded. And think twice before getting excited and renting a luxury vehicle. You will often give up insurance protection if you do.
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• The bottom line. If you have a credit card that offers primary auto insurance, you can turn down the loss damage waiver so long as you make the reservation and pay for the car with that card. If your primary auto insurance covers rental cars, you should still consider using a credit card that offers secondary insurance for the most protection. Only if you don’t have sufficient primary auto insurance coverage or don’t have a credit card with a car rental benefit would you want to buy the loss damage waiver.
Personal accident insurance
Car rental companies frequently sell medical insurance as well as life insurance policies, but it's generally a bad idea to buy them. Your own health insurance should cover you. If you're going overseas, call to make sure your policy works there. If it doesn’t, you can shop online for travel medical insurance. The Department of State has a list of travel insurance companies.
• The bottom line. Usually, the answer to this question is no.
Personal effects insurance
Anything you keep in your rental car could be lost, stolen or destroyed. Car rental companies want to sell you insurance to protect your possessions. For most people, this type of insurance just isn’t necessary. If you have a homeowners or renters policy, you're most likely already covered.
• The bottom line. Usually, the answer to this question is no.
Additional liability insurance
If you are at fault in a wreck, you could be held responsible for the damages to someone's property as well as their medical bills. These liabilities could be significant ... but if you already have car insurance, you're probably covered.
• What to watch out for. Check with your primary insurer and make sure your liability coverage extends to rentals. Remember that the insurance offered by credit cards will not protect you from this liability.
• The bottom line. If you don’t have auto insurance, you will want to protect yourself against third-party liabilities. If you don't rent cars often, you might want to take the car rental company up on its liability coverage. If you are a frequent renter, consider buying a non-owner car insurance policy, which provides liability insurance when you drive someone else’s car, including rentals.
Don’t wait until you get to the rental car counter to think about insurance, or you will probably end up paying too much. For most people, a combination of their primary auto insurance and credit card will be enough to stay protected while saving money.
Nick Clements is the co-founder ofMagnifyMoney, a leading personal finance website.