If you’re like most people, you’re probably confused about what is covered by your auto insurance policy when you rent a car. According to a survey by the National Association of Insurance Commissioners (NAIC), four out of ten car renters have only a vague idea to what degree their auto insurance covers rental cars. About one third end up buying the rental car company’s insurance just to make sure they’re covered.
This can quickly become an expensive affair. Auto rental companies sell not just one, but multiple types of coverage: collision damage waivers, loss damage waivers, supplemental liability insurance, personal accident insurance and personal effects protection. By the time you’re done, the insurance costs can end up almost doubling your rental cost.
The good news is that you may not need that extra insurance. Supplemental auto insurance is one of the great credit card deals available to most cardholders. All you have to do to get the benefit is simply charge the rental fee to your credit card.
Most credit cards include collision and theft protection over and above what is provided by your personal auto insurance. This means that your credit card company may reimburse you for the deductible on your personal automobile insurance, plus any reasonable administrative costs and loss-of-use charges imposed by the rental car company. Most credit cards also pick up the tab for towing charges (within reason) associated with repair to the rental car.
If you don’t have personal auto insurance or any other insurance covering this loss, your credit card provider may even reimburse you for the entire cost of physical damage or theft to the car.
Before you decline the rental car insurance, however, check to see what is covered by both your personal auto insurance and your credit cards. Some personal auto policies may not cover rentals on business trips or rentals in foreign countries and they may limit coverage for long-term rentals.
Similarly, there are limitations on what is covered by credit cards. Firstly, the coverage varies between card issuers, so check up on the terms offered by your credit card before using it. While Visa credit cards offer rental insurance to all cardholders and American Express supplies it to most of its cardholders, MasterCard and Discover only provide it to their premium cardholders.
Most credit card companies won’t cover a car that is rented for more than 30 days, in some cases as little as 15 days. Coverage is typically capped at $50,000 (or $25,000 for Discover Cards) and some credit cards, like Discover cards, only offer coverage in the U.S. and Canada, while other card issuers limit coverage to certain countries. In addition, while most passenger cars, minivans, and sport utility vehicles are covered, some types of cars like expensive trucks or antique vehicles are not.
To be eligible for the service, you have to charge the entire rental fee to a U.S. issued credit card and you have to be the primary renter of the car. Losses must be reported within 45 days of the incident or you lose your coverage.