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Insurance for Rental Cars

Traveling is stressful enough. From security checks to flight delays to baggage claim, travelers have plenty to think about without worrying if they need rental car insurance. But rental car companies are quick to offer coverage for just a few dollars a day – a small price to pay for peace of mind – but is it right for you, or just another source of revenue for them?

State Farm® is here to help!

Contact a State Farm Agent

Do You Need Rental Car Insurance?

Chances are, if you already have State Farm car insurance with collision and comprehensive coverage, it'll carry over to your rental car. But what's covered and how much depends on your specific policy and several other factors. You might also have coverage for any personal effects that may be damaged or lost in an accident if you have State Farm homeowners insurance.

Additionally, if you've purchased travel insurance on the trip you are on, that insurance may offer rental car coverage.

For most people traveling for personal reasons, paying extra for coverage from a car rental company is probably a waste of money. But there are a few situations when you should consider it:

  • Your personal car insurance has a very high deductible, doesn't include adequate collisionliability or comprehensive coverage, or doesn't cover rental cars (some don't).
  • You would like to temporarily have protection you don't currently have such as emergency road service, personal injury protection (PIP) or medical payment coverages.
  • Your current coverage has exclusions or restrictions. Rental car insurance often has diminished value coverage. If you don't have diminished value coverage, you may be on the hook for any loss of resale value caused by the accident. Your current policy may also have restrictions that exclude the type of vehicle you're renting, such as a truck, motorcycle or recreational vehicle.
  • You have no other source of coverage. For example, if you don't own a car and therefore have no personal car insurance policy, and you're not using a credit card that offers rental car coverage.
  • When an accident might cause your insurance rates to go up or lead to cancellation.
  • You're traveling for business, and your personal insurance policy won't cover you.
  • You're traveling in another country and the insurance agreement or local laws prevent you from leaving until you've fully paid for any damages that might occur.
Talk to your State Farm agent about your car insurance policy before renting a vehicle to see what you need to consider.

Credit Card Coverage for Car Rentals

Many credit card companies offer rental car insurance as a perk. Contact your card issuing company to see if they provide this car insurance coverage, how much, and what limitations there may be. There is no reason to pay extra for coverage if it's already provided. 

Be aware that most credit cards only provide secondary coverage. That means your primary coverage may come from your auto insurance policy and you'll have to pay any deductibles and may see your rates increase if you're in an accident.

Loss Damage Waiver (LDW)

At the rental car office, you're likely to encounter certain insurance-related terms. "LDW" stands for Loss Damage Waiver, and it limits the amount you'd be responsible for if your rental vehicle is damaged or stolen. "CDW" is similar, but it only covers losses caused by collisions.

While these options are usually referred to as "insurance", they're really "waivers" since the rental car company is waiving its right to hold you accountable for certain types of loss.

You may also be offered "PEC" (Personal Effects Coverage) which covers personal effects, or "PAI" (Personal Accident Insurance) which covers personal injuries while renting a vehicle.

Claims Process

The claims process should be the same with whatever type of coverage you choose, except you'll need to work through the rental car company if you went with the rental car insurance.

Disclosures and Disclaimers

State Farm Mutual Automobile Insurance Company
State Farm Indemnity Company
Bloomington, IL

State Farm County Mutual Insurance Company of Texas
Richardson, TX