Rental car insurance coverage scenarios: Tips to help you decide what to consider
Learn whether you should consider purchasing rental car insurance coverage and which option to choose, based on your auto insurance policy, where you plan to travel and what type of vehicle you rent.
Overview: Rental car insurance isn’t a one-size-fits-all decision. The option that’s right for you may depend on many factors, including whether you’re currently covered, where you’ll be driving the rental and the type of vehicle you choose. These tips can help make the decision easier by illustrating common scenarios, such as renting with or without personal car insurance, high-deductible personal policies, renting internationally or choosing an excluded vehicle type, that could reflect your specific situation and needs.
When you’re standing at the rental counter, deciding which car rental insurance option to choose can feel confusing. You may wonder, “Do I need rental car insurance?” There’s no universal answer, since your choice may depend on your individual circumstances. The tips below explores typical rental situations to help you determine which option may fit your needs.
Scenario 1: You don’t have your own U.S. auto insurance
Say you don’t have your own U.S. auto insurance. Maybe you don’t own a car, are a young driver without a personal auto policy or are visiting the U.S. from another country without full coverage from a U.S.-based insurer. In this situation, you could need coverage to help protect you from liability (for injury you might cause to others) and from physical damage (for damage you might cause to the rental car). You may want to consider purchasing Supplemental Liability Insurance from the rental company, as rental car liability insurance may help provide financial protection and may be required by law.
To help protect against damage to the rental car, consider accepting the Collision Damage Waiver or Loss Damage Waiver offered by the rental company, which could mean the rental company may not charge you for damages or theft, within the terms and exclusions of the agreement. Alternatively, check if your credit card provides primary car rental insurance coverage for your specific rental, and verify the vehicle type, location and rental duration rules. However, keep in mind that credit card benefits might not include liability coverage, so adding Supplemental Liability Insurance from the rental company may be a good option.
Scenario 2: You do have your own U.S. auto insurance
If you have a standard U.S. policy, is rental car insurance necessary? It depends. Some of your coverage may extend to a rental car if it’s for personal use within the U.S. or Canada (check your policy’s coverage territory). Your main consideration should be whether your existing policy offers enough coverage and if you’re comfortable relying on it, or if you’d prefer to purchase extra protection from the rental company.
When it comes to liability, your policy’s coverage may extend to rental car usage for personal trips within the covered territory. It’s important to review your liability limits to ensure they’re high enough, especially when driving an unfamiliar vehicle in a new area. If you want higher limits or wish to try to avoid making a claim on your personal policy, consider purchasing Supplemental Liability Insurance from the rental company.
For damage to the rental car, if your own policy includes collision and comprehensive coverage, this could apply to rental cars as well. However, you may be responsible for your policy’s deductible in the event of a claim, and making a claim could impact your future rates. Your policy also might not cover extra charges from the rental company, such as “loss of use” or “diminished value.” Choosing the rental company’s Collision Damage Waiver or Loss Damage Waiver may mean you don’t have to use your personal policy or pay your deductible for rental car damage, and these waivers sometimes cover extra fees like “loss of use.”
Additionally, check your credit card benefits. Some cards offer secondary rental coverage, which may help pay your personal auto policy’s deductible if the rental car is damaged. Other cards offer primary coverage, which allows you to file a claim with the credit card company instead of using your personal auto policy. Keep in mind, though, that credit card coverage may be separate from liability coverage.
Scenario 3: Your personal auto policy has a high deductible
When you have a high deductible ($1,000 or more) on your collision or comprehensive coverage, you might have to pay a significant amount before your insurance may help cover repairs if your rental car is damaged.
In this situation, you may want to consider whether you’re comfortable with the possibility of paying that high deductible. You have a few options. You can rely on your personal policy and accept the risk of covering the high deductible yourself, or you can purchase the rental company’s Collision Damage Waiver or Loss Damage Waiver. While these waivers come with a set daily cost, they may help you avoid paying your high deductible for rental car damage. Some policies may offer a Rental Car — Repayment of Deductible Expense benefit. Check your policy.
Some credit cards offer secondary rental coverage and may specifically reimburse your personal policy’s deductible if you file a claim, which can help reduce your out-of-pocket expenses if the rental car is damaged.
Scenario 4: You’re renting outside the U.S. or Canada
In many cases, your U.S.-based auto insurance may not provide coverage in foreign countries (Canada can often be an exception, but it’s important to verify this with your insurer before you travel).
In this situation, you may want to arrange for both liability and physical damage coverage that’s valid in the country where you’ll be renting the vehicle. For liability, you may need to purchase local liability coverage to meet the legal requirements of your destination. This coverage may be available through the rental agency.
When it comes to helping protect the rental car itself, carefully review your credit card benefits to see if they provide coverage in your destination country. Many countries are excluded from credit card rental car insurance, and even if coverage is available, you’ll want to check if it’s primary and obtain proof if possible. If your credit card coverage isn’t available or doesn’t meet your needs, you may need to purchase the local rental agency’s Collision Damage Waiver or Loss Damage Waiver to help ensure you have adequate protection for physical damage.
Scenario 5: You’re renting an excluded vehicle type
This situation applies when you’re renting a type of vehicle that is typically excluded from coverage by personal auto policies and credit card rental benefits. Common excluded vehicle types include large passenger vans (often those with 10 or more seats), trucks (especially larger ones like moving vehicles), RVs and motorhomes, motorcycles and mopeds as well as very expensive luxury or exotic cars.
In these situations, you may want to consider coverage that is specifically designed for the type of vehicle you’re renting. For liability, it’s important to check whether your personal liability coverage still applies. Sometimes liability coverage may extend to the rental, even if physical damage coverage does not. If your policy does not apply, or if you want higher limits, consider purchasing Supplemental Liability Insurance from the rental company if it’s available and appropriate.
When it comes to coverage to help protect against physical damage to these excluded vehicle types, you may not be able to rely on your personal auto policy or credit card benefits. In many cases, purchasing the rental company’s Collision Damage Waiver or Loss Damage Waiver may be the primary way to obtain coverage for physical damage to the vehicle.
Summary chart for quick reference
Many people renting a car may ask, “How does insurance work on a rental car?” and “Which coverage do I actually need?” The chart below provides quick answers to both questions based on your situation.
No personal U.S. auto insurance
May need both liability and physical damage protection
Consider buying Supplemental Liability Insurance
Consider buying Collision Damage Waiver or Loss Damage Waiver; or using verified primary credit card benefit (if applicable)
Have personal U.S. auto insurance
Decide if existing coverage will be sufficient
Review policy limits; consider Supplemental Liability Insurance
Consider relying on personal policy (pay deductible); or buying Collision Damage Waiver or Loss Damage Waiver; or using verified credit card benefit (primary or secondary)
Have high personal deductible
May risk high out-of-pocket cost for physical damage to rental car
May be covered by personal liability
Consider relying on personal policy (accept deductible risk); or buying Collision Damage Waiver or Loss Damage Waiver; or using secondary credit card benefit (may cover deductible)
Renting outside the U.S. or Canada
U.S. personal policy may not apply
Consider buying local liability coverage
Consider buying local Collision Damage Waiver or Loss Damage Waiver; or using verified primary credit card benefit (if applicable and country is covered)
Renting excluded vehicle (e.g., truck or RV)
Personal or credit card policy may not cover physical damage
Check if policies apply; consider Supplemental Liability Insurance
Consider buying Collision Damage Waiver or Loss Damage Waiver from rental company
*This chart provides general considerations. Reach out to your insurance provider. Coverage details vary based on your personal auto policy, credit card benefits guide and specific rental agreement terms and conditions.
Making the right choice for your rental car insurance
Choosing the right car rental insurance coverage for you can feel overwhelming, but understanding your own situation and the type of coverage available can help you make more confident decisions at the rental counter. Whether you have a personal auto policy, are facing a high deductible, are renting outside the U.S. or are considering a specialty vehicle, there may be an option to help protect yourself from unexpected costs.
To discuss how your specific State Farm® auto policy might provide coverage when you rent a car, contact an agent today.
The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.
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Richardson, TX
