Editorial Policy

Credit Card Rental Insurance: Are You Covered?

Marcia Frellick

May 22, 2012

Turning down rental car insurance because you think your credit card covers you already can leave you in a ditch if you’re not careful.

Read on for some common coverage gaps — or check out our chart below to see what your card does (and doesn’t) cover.

Coverage basics
To find out what your card covers, look in its terms and conditions. Search for the terms collision damage waiver (CDW)” or “loss damage waiver (LDW).” You’ll find that card companies differ in the amount of damages they cover, which cars are excluded, which locations are excluded (some countries and types of roads may not be covered) and how long coverage lasts.

A few things, however, are practically universal among the major credit card companies: None will cover limousines, exotic or antique cars, campers, large vans, trucks or motorcycles. And the basic, free coverage that comes with the card generally doesn’t cover injuries.

Coverage considerations
Your credit card agreement will cover your coverage in detail. Here are important questions to know the answers to before you get to the rental counter.

Is your coverage primary or secondary? Many of the major issuers offer secondary coverage, meaning it kicks in only after your regular car insurance pays.

“Usually the credit card company is only paying the deductible,” says Randy Harris, president of Khoury-Alternative Claims Management, a damage-recovery company that specializes in car rental claims.

Because your primary car insurer pays first, it will know about any accidents you get into in the rental car — and your premium could increase.

Diners Club is a notable exception. Its cards offer primary coverage, which pays for all damages without your primary insurer getting involved. American Express also offers the option of upgrading to “premium” primary coverage for $24.95 per rental.

How high does your coverage go? Coverage through your card typically covers up to $50,000. Discover offers only up to $25,000 (and only on collisions, not theft). American Express and Diners Club, meanwhile, offer higher coverage for premium cards. Visa says it offers up to the actual cash value of qualifying cars.

Are fees covered? Getting in a wreck involves costs beyond repairing the car. There are towing costs, as well as “loss-of-use fees” (fees charged to the renter to cover the time the agency wasn’t able to rent the damaged vehicle).

Some cards will cover some of the towing costs, but their terms often specify that the car must be towed to the “nearest” facility — not the one most convenient for you. Coverage for loss-of-use fees is also common.

Which fees aren’t covered? The real “gotcha” can come in the form of administrative fees, which many cards do not cover. “Administrative fees” is an umbrella term for all the costs the rental company incurs while filing insurance claims.

“This is usually in the ballpark of 10 percent of the damages,” Harris says. “It’s usually capped at $250, sometimes $500.”

Visa’s terms specify that administrative fees are covered, but the others examined for this article do not.

Rental car companies may also charge a “diminution of value” fee, as compensation for a vehicle’s decrease in value after an accident. Most major credit card companies state they won’t pay for that, either.

Qualifying for coverage
To qualify for your card’s insurance coverage, follow your cardholder agreement to the letter. If you violate the terms of the agreement in any way, the credit card company will refuse to cover the claim, Harris says.

For example, if you let an unauthorized driver use the car and that person gets in an accident, you’re not covered. If you put down a credit card to reserve the car but pay for the rental period in cash, the credit card company won’t cover it, because the charge wasn’t on the card. If you can’t produce the keys to prove you didn’t leave them in the car before it was stolen, you may not be covered.

So does your card cover you? Is there a card out there with better coverage? Use our card comparison chart to find out. Terms may change, so check with your issuer for the most up-to-date information.