Auto Insurance – What You Need to Know Before Buying Car Rental Insurance

For some drivers, rental car insurance is a necessity. For others, it's a redundant expense. But, how do you know which category you're in?

Before you rent a car, it's worth reviewing the coverage on your personal car insurance policy. In some cases, the coverage you have on your own car extends to a rental car. In other words, buying rental car insurance coverage may duplicate what you already pay for.

The extra cost of the rental company's coverage might make sense in a few cases, however. For that reason, it's important to understand what your personal auto insurance covers, and what the rental agency is offering.

DOES MY CAR INSURANCE COVER RENTAL CARS?

If you have a personal car insurance policy , it includes liability coverage and any additional coverage you've opted for, such as comprehensive or collision. That coverage may extend to your rental car, as long as you drive it for personal use. The coverage limits and deductibles on your personal policy also apply to your use of a rental car.

Liability coverage helps pay for another person's medical bills or damage to another person's property if you cause an accident in your vehicle (or your rental vehicle).

Comprehensive coverage helps pay to repair your vehicle (or your rental car) if it's damaged by a covered peril, such as theft, wind, fire or natural disasters. Your comprehensive coverage's deductible will apply.

Collision coverage helps pay to repair your vehicle (or your rental car) if it's damaged when you collide with another vehicle or object, such as a fence or a tree. Your collision coverage's deductible will apply.

DOES MY CREDIT CARD HAVE RENTAL CAR COVERAGE?

In addition to your auto insurance, certain credit cards offer extra insurance if you pay for a car rental using that card, according to the Insurance Information Institute (III). If you have extra rental car insurance through a credit card issuer, call the toll-free number on the back of your card and have them explain your options in detail before you reserve your car.

For example, if your credit card provides collision coverage for rental cars, then you might decide not to purchase that coverage from the car rental agency. The card issuer's insurance is typically "secondary," according to the III. That means it may pay your deductible and expenses that exceed what your primary insurance company will pay.

WHEN IS RENTAL CAR INSURANCE COVERAGE A GOOD IDEA?

If you don't currently have insurance, you'll need to at least buy liability coverage from the rental company before you hit the road. That's because liability coverage for all drivers is required by law in most states.

If any of the following scenarios apply, the extra protection provided by rental insurance is worth considering:

• Your current policy doesn't have comprehensive and collision coverage
• You're only insured under a commercial car insurance policy
• You don't want to risk paying a high deductible

And if you're driving abroad (apart from Canada), your current car insurance probably won't cover you. Check your policy to find out.

WHERE ARE THE REDUNDANCIES IN AUTO INSURANCE vs. RENTAL INSURANCE

Rental car agencies typically break out extra rental car insurance offerings into four sections, according to the III:

• Liability coverage
• Personal effects coverage

Liability Coverage

Liability coverage is intended to help protect you if you injure someone or damage their property while driving. If you have sufficient liability coverage through your own auto insurance, you may not need to buy extra rental car liability insurance coverage from the agency.

Personal Effects Coverage

Personal effects coverage may help cover your personal belongings, such as your laptop or clothing, if they're stolen from the rental car. If you have renters or homeowners insurance, the personal property coverage on that policy typically helps cover your personal items through what's known as "off-premises coverage." These items are usually only covered up to a certain percentage of your personal property coverage. The deductible on your homeowners or renters insurance will apply.

One thing to also keep in mind is whether a rental car company offers coverage for “loss of use” due to repairs resulting from a crash while the rental car was in your possession. Your personal auto insurance may cover the cost of repair due to collision , but it doesn’t include the loss of income to the rental car company when its vehicle is out of commission for repair.

COVERAGE TO CHECK BEFORE YOU RENT A CAR

Before you rent a car, take a few minutes to find out whether you have coverage through existing channels, such as your credit card company, health insurance plan or renters or homeowners policy. And, be sure to check your personal car insurance coverage. Buying extra rental car insurance may not make financial sense if your auto policy already provides the coverage you need.

Don't hesitate to reach out to your local agent about your car insurance policy before you rent a vehicle. He or she can help you make an informed decision when you're at the rental counter.