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Dislaimer: I am neither an insurance agent nor a personal injury lawyer. Insurance policies vary tremendously, so please read the terms of your insurance policy and talk with your insurance agent when making a decision to purchase insurance.
Million Mile Secrets reader Joey writes in:
I had a question regarding car rental insurance. Normally I decline all rental insurance and just book on my [AMEX] platinum. Is this the best route to go?
Keep in mind I have no car so I don’t have any other insurance. What should I be doing about insurance for the other car in an accident? Should I be taking the 3rd party insurance from the rental company?
The usual suggestion for folks who own cars (with personal car insurance policies) and who have credit cards which provide either primary or secondary rental car insurance, is to decline the coverage provided by the rental car agencies. That’s because you are likely already covered for damage to the rental car via your credit card insurance, and for injury or death of another person or damage to others’ property up to the limits of your personal car insurance policy.
But declining rental car insurance when you have no personal car insurance policy (or if your personal policy doesn’t cover rental cars) makes you personally liable for damage to other vehicles, damage to other property, and bodily injury to others if you’re the reason for an accident.
This is usually the most costly part of a car accident and could cost hundreds of thousands or millions of dollars!
Types of car insurance
There are actually at least three types of coverage which rental car insurance companies sell:
|Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) Insurance||Liability Insurance||Personal Property Insurance|
|Insurance Covers||Damage to rental car only||Damage to other cars, property, and injury or death of other persons||Value of your stuff in the rental car.|
|Potential Liability||~$70,000 for average full size or SUV + Reasonable loss of use charges||Hundreds of thousands or millions of dollars||~$3,000+ for laptops, cameras, GPS, electronics, etc.|
|Insurance provided if you rent with a US-issued credit card||Some credit cards cover damage to rental cars on primary or secondary basis.|
Exclusions apply so read the fine print.
Sometimes purchases may be covered by insurance on the credit card used to purchase the items.
1. Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)
This coverage covers you for damage to the rental car only and any loss of use charges (for example, the car couldn’t be rented while it was in the shop getting fixed) incurred by the rental car company only. It does NOT cover damage to other vehicles, injuries to persons in the rental car or other vehicle or other property damage (for example, if you drive into a wall).
This is often the most duplicated type of coverage because you usually get the benefits of CDW or LDW insurance when you rent using certain credit cards. In some instances the coverage with a credit card is primary, and in other instances it is secondary.
Note that there are often limitations on the value of the car and length of car rental when using CDW or LDW insurance via a credit card. These differences vary by state and credit card, so I can’t list them all here.
You may also have this coverage via your personal car owner’s comprehensive or collision insurance, but read your policy to find out more about coverage, deductibles, and limits.
Joey doesn’t need to purchase CDW or LDW insurance if he pays for the full price of the rental car on his American Express Platinum card because the credit card provides secondary CDW or LDW insurance for 30 days (some countries are excluded so read the terms and conditions).
However, there will be additional coordination and paperwork if Joey has to file a claim through his credit card insurance versus if he had purchased the CDW or LDW insurance from the rental car agency.
Potential liability if Joey doesn’t have this coverage: ~$70,000 for the value of a full size car or SUV + reasonable loss of use charges.
2. 3rd Party Liability Insurance
Liability insurance covers you for damage to other vehicles, bodily injury or death of others or damage to others property.
In my opinion, this is the most important rental car insurance coverage to have because the liability of a serious car accident could be hundreds of thousands or millions of dollars!
I once banged into the fender of a parked car at a Hampton Inn in Minnesota seven years ago. I left a note with my contact information on the other car, and my employer who was self-insured paid ~$700 to settle the claim for an extremely minor dent that was virtually unnoticeable. The point – these things can cost lots of money!
Credit card insurance does NOT provide any liability insurance for damage to third parties. And even the premium car rental insurance from American Express provides NO third party liability coverage.
However, if you have car insurance, the liability insurance coverage along with your deductibles and limits *may* carry over to when you rent a car. But read your own car insurance policy carefully or ask your insurance agent to confirm if your personal car insurance policy will carry over to a car rental.
Again, NO credit card car rental insurance covers you for the most financially devastating type of liability if you get into a car accident – which is usually the damage to other cars, persons, or property.
I try to save money where I can, but I’ve always paid more to get a personal car insurance policy with much higher limits than the state minimum requirement. A serious car accident can be very costly!
Joey should purchase the optional supplemental insurance from the car rental agency or look into getting a non-owners car insurance policy which will cover him for liability towards others when he rents a car.
Potential liability if Joey doesn’t have this coverage: Possibly hundreds of thousands or millions of dollars.
3. Personal Property Insurance
This insurance usually covers you for theft or damage of your personal property (laptop, camera, etc.) in the rental car.
However, you *may* already be covered for the theft or damage to your personal property via your personal homeowners, rental, or umbrella insurance policies. But read your policy carefully or ask your insurance agent for the specifics of what’s covered, limits, and deductions.
Depending on the personal property which Joey travels with and the terms of his homeowners or rental insurance, he may want to consider personal property insurance. Or since the maximum out of pocket cost is not as high as going without personal liability or CDW insurance, he could make a calculated decision to not buy personal property insurance.
Potential liability if Joey doesn’t have this coverage: The value of the stuff he has in the car – laptop, camera, GPS, clothes etc. Perhaps $3,000 to $4,000.
Bottom Line: If you don’t have a car insurance policy with 3rd party liability coverage which transfers over to your car rental, you should consider a non-owners car insurance policy if you rent cars often or pay for personal liability insurance through the rental car company.
Otherwise you could be on the hook for hundreds of thousands or millions of dollars in damages if you get into a car accident.