Car Rental Insurance Do’s and Don’ts

It’s possible to double the daily rate of your rental car with add-ons such as a second driver, navigation system, toll road pass, car seat, ski rack or bike rack. If you are renting a vehicle this spring and summer travel season, these smart spending tips will help save money, even legal grief.

The largest optional daily cost most likely is insurance, which can add up to $40 a day for collision and liability coverage.

Whether you need to sign up for optional Loss Damage Waiver (LDW) and Collision Damage Waiver (CDW) insurance depends on many things. There’s no one-size-fits-all answer.

It depends on what your own auto insurance policy and homeowner’s policy cover, and the policy of the credit card you use to rent the vehicle. It also depends on where you will be driving and for how long.

Your own auto insurance policy may include rentals

In most cases, your own auto insurance policy extends coverage of bodily injury, personal property, vehicle damage and loss to a rental car. Check your policy, or ask your insurance agent before renting to avoid buying duplicate coverage.

However, consider buying the rental company’s coverage when it costs less than the deductible on your owner’s policy. That way, you won’t have to make a claim for a ding or cracked windshield, and your own insurance claims record stays clean.

• Smart spending tip – If you travel and rent often, consider adding an annual rider to your auto or homeowners insurance policy, or a separate umbrella liability policy.

Your credit card might provide rental insurance

Most credit cards offer built-in coverage, which increases with premium level cards, such as gold, platinum and sapphire. However, that can be false security, especially if you do not own a vehicle and do not have your own vehicle insurance, since even the most premium credit cards are unlikely to cover liability.

Read credit card rental insurance carefully for gaps in coverage. A phrase such as “this product provides secondary coverage and does not include liability coverage” could wipe out your nest egg if you are in an accident with injuries.

Look for the phrase “loss of use”, which means you could be liable for the time the vehicle is in the shop and unavailable for rental. You also could be held liable for administrative fees, for the paperwork the rental company must do with its own insurance company.

And be sure your credit card insurance covers rental trucks.

According to the credit card comparison website creditcards.com, none of the so-called “big five” (Amex, MasterCard, Visa, Discover, Diners Club) cover rental trucks, RVs or exotic sportscars.

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What else?

Most rental company insurance plans are capped at 30 days.

• Smart spending tip – If you need a vehicle for longer, break the rental into shorter periods to stay under the 30-day limit.

Include the names of all drivers on the rental contract, since insurance coverage is normally invalidated by a “non exsistent” driver.

Where you rent and drive is also important. Credit card insurance does not cover you in foreign countries including Australia, New Zealand, Ireland, Israel, Jamaica or Mexico, and your own auto insurance policy likely won’t either.

So, it is most important to buy insurance in the country where you are renting, and ask about the rules for insurance coverage if you will be crossing borders, such as between Germany and France.

Before you go, check whether your driver’s license is enough to rent or drive in the country you are visiting.  Even if it is, it is well worth the $20 fee to get an International Drivers Permit (IDP).

Your IDP is a valid form of identification in 150 countries worldwide and contains your name, photo and driver information. It translates your identification information into 10 languages — so it speaks the language even if you don’t, so consider it another form of car rental insurance.

• Smart spending tip – Get an IDP directly from the AAA, and avoid paying service fees to companies that will apply for you. It makes no sense to use a third party, since you have to send the service company the same documents you could send directly to the AAA.  Besides saving money, applying directly to the AAA saves time.

What’s your best and worst experience with a rental car?  Add a comment below.

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