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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?

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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.

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 collision or comprehensive coverage, or doesn't cover rental cars (some don't).
  • 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.

Credit Card Coverage for Car Rentals

Many credit card companies offer rental car insurance as a perk. Contact your card issuing company to learn 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 is already provided.

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.

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