You've probably been there before. You're standing at the car rental counter, and the agent is trying to terrify you into purchasing an insurance package that totals more than the rental itself. After all, they're not getting rich off that super $10 a day deal that you snagged through AutoSlash!
Before you dismiss the pitch with a wave though, and initial eight times in the 'DECLINE' section of rental agreement, there are some things you probably should consider to ensure sure you're adequately protected in the event of an accident. Here's a quick guide to covering your bases when renting in the US (policies outside the US vary greatly).
The Easy (and Expensive) Way Out
While it's no secret that over-the-counter rental coverage is way overpriced, it does serve a purpose. If you do have an accident, and you've opted for the rental company's Loss Damage Waiver (LDW, sometimes called Collision Damage Waiver or CDW), then the car rental company will waive any repair costs if the rental car is damaged or stolen, provided the car is not driven recklessly or driven by an unauthorized driver.
There is certainly some peace of mind that comes with handing the keys back to the agent at the end of your rental, and not worrying about insurance deductibles, submitting claims to third parties, or getting stuck in the middle when there's a dispute. LDW usually waives pretty much any costs associated with damaging your rental car--including things like loss-of-use, diminished value, administrative fees, towing charges, and even pro-rated license and registration fees. Suffice it to say, these things can add up, and it's nice not to have to worry about them.
However, prices for LDW can run anywhere from $20-30 per day and up, depending on the location, company, and car you're renting. Note that some states--most notably California and New York--have laws limiting the price of LDW to something less insane--as low as $9 a day for basic cars and a little more for more expensive cars, SUVs, and vans, but elsewhere in the country, expect to pony up double-digits each day for protection.
Bottom line: It's a premium product--but at a premium price.
The Other Options
LDW is a major profit center for the rental companies. Surely there has to be a cheaper option! Let's take a look at some alternatives.
Your Personal Auto Insurance Policy
While there's peace of mind that comes from being super-well protected with the rental company's LDW, you may be wasting your money. If you decline the insurance provided by the rental company, then your personal auto insurance policy will often cover you when renting. Assuming you've confirmed this with your insurance broker or carrier, then LDW sold by the rental company often duplicates coverage you already have in place.
On the other hand, relying on your own insurance company likely means that you'll have to pay your deductible, and filing a claim might drive up your insurance premiums.
Bottom line: You might already be covered, but check with your insurance carrier, and be aware of the costs you'll be responsible for.
Your Credit Card May--or May Not--Be Enough
It's fairly common today to have car rental insurance included with your credit card—especially with gold, platinum and business cards. It's important to realize though that all coverage is not created equal. Renters who get into an accident often find out the hard way that most cards offer what is known as "secondary" coverage, which basically means that it will only pay out after your personal auto insurance policy has been exhausted (assuming you have such a policy)--so at best, you'll still have to file a claim with your insurance company, and the credit card will only pick up your deductible. (Some credit card policies may also have a deductible.)
There are an increasing number of cards, though, that are starting to provide primary collision coverage. A search online for "credit cards primary rental car insurance" should yield some results worth looking at.
Careful, though. Credit cards often have many conditions and stipulations on when they will pay out. For example, some won't cover SUVs, vans, or luxury cars. Some exclude rentals in certain countries (pay special attention if you're renting in Australia, Israel, Italy, Ireland, Jamaica, or New Zealand). Many won't cover rentals longer than 15 days, and often extra fees the rental company charges above the damage (like loss of use, diminished value, and administrative fees) aren't covered, either. A car rental industry insider I spoke with told me that he's seen credit card companies try to weasel out of claims on tiny technicalities, so it's crucial to understand what you are covered for before you decide to rely solely on your credit card's coverage and make sure you follow all procedures to the letter.
Bottom line: Ask your credit card company for a copy of their rental insurance policy and familiarize yourself with what it actually covers. Even different cards from the same company can vary widely in terms of coverage. And look for cards that provide primary coverage if possible.
Premium Protection from American Express
American Express offers an interesting product in the form of Premium Car Rental Protection for existing Amex cardholders. Once you opt-in to the product (call or look in your account online), your Amex card is automatically charged a flat $24.95 each time you rent ($17.95 for California residents). Unlike typical credit card coverage, this is primary coverage, which means that it kicks in before your personal auto insurance policy. There's no deductible to pay, and coverage limits are much higher than a typical credit card policy. Most vehicles are covered, and you can be covered for up to 42 consecutive days for that single $24.95 fee.
The terms of Amex's Premium Protection are also a bit more generous than most other cards' coverage policies (including even Amex's own free, secondary coverage). The $24.95 price-point covers most rental vehicles up to $100,000, even large SUVs and vans, and Amex has a reputation for good customer service--the rental industry insider I spoke with said the incidence of denied claims is much lower with Amex's Premium Protection.
On any rental of more than two days, you'll almost certainly come out ahead with Amex vs. buying LDW from the rental company--the rental company's coverage is charged each day, while Amex's Premium Protection is a single fee regardless of the length of the rental.
Bottom line: If you don't have a credit card with free primary car rental coverage, you can add this product on to any Amex card and get similar--perhaps even better--protection. And even if you do have a personal auto insurance policy, it will provide an extra measure of protection and keep your insurance company out of the loop should something happen.
Dedicated Car Rental Insurance Coverage
If the above options don't work for you or you'd like a little extra protection, you can buy an insurance policy from a third party in advance for much less than the rental companies charge for their LDW. Several companies, including well-regarded travel insurance companies like Allianz and Travelguard, sell policies for less than half of what most rental companies charge. Often you'll see these types of policies offered by the major online booking sites. They can be more reasonably priced than the car rental company, but keep in mind, this is still 3rd part insurance.
Bottom line: Third-party dedicated car rental insurance can provide you peace of mind at a much lower price than the rental companies charge.
What About Liability?
We've focused above on coverage for damage to your rental vehicle so far, but what about the unfortunate situation where you damage someone else's vehicle or property or injure someone? That's where liability comes into play.
The good news is that rental companies are required by law (except in California) to provide state-mandated minimums for liability coverage in the basic rate, although it's secondary to your own insurance in many states. The bad news is that state minimum coverage requirements are generally pretty low. While the state minimums may cover some fender benders, in a more serious accident, you may be sued for more than you're covered for, which can leave you financially exposed in a major accident if you don't have an auto insurance policy that'll step up to the plate. Between property damage and expensive hospital bills, a large accident can total up tens or even hundreds of thousands of dollars in losses--and someone has to pay those bills.
Of course, the rental companies have an answer for this as well in the form of Supplemental Liability Coverage (SLI or SLP). For a per day fee, SLI will supplement the state-mandated coverage provided by the rental company, typically up to $1 million. Your own personal auto coverage will be on top of what the rental company offers as standard, so SLI may not be necessary, but if you don't have a personal auto policy, or you want the extra protection, then SLI may make sense for you.
Just like LDW, SLI is expensive, though not usually as much as covering your rental car--figure somewhere in the range of $10-15 a day. If you want extra liability protection but don't want to pay rental company prices, it's a little harder to find alternatives and get around their high rates.
For one, it's practically unheard of to find a credit card that includes liability coverage. Travel insurance and third-party rental car collision insurance products don't generally offer it, either. Even American Express's fancy Premium Car Rental Protection doesn't touch liability, only damage to the rental car.
If you're from the US and don't own a car (or your car insurance doesn't extend liability insurance to rental cars), you're pretty much limited to a non-owner policy. It's tough to find an insurance carrier that will issue these, and even if you do, chances are the insurance agent you talk to won't be familiar with them and might not even know they exist. Some names we've heard mentioned in the industry are GEICO, Progressive, and Allied Insurance. An independent insurance agent may be able to shop around and help you find the best policy and rates. We've heard good things about New York-based Campbell Solberg, and they appear to be very familiar with non-owner policies.
If you're from Europe, you may be in luck. Since travel from Europe to North America is so common, there are lots of options for Europeans to get good deals on bundled rental car insurance in the US and Canada Some Europe-based travel agencies like Expedia UK offer all-inclusive rates with insurance (both LDW and SLI) at discounted prices. For Europeans who'd like to take advantage of AutoSlash's great discounted rates and still get discounted coverage, companies like Insurance4CarHire.com sell policies that provide coverage in the US and Canada.
Bottom line: Make sure you're not left financially exposed to liability claims. If you own a car in the US, you're likely fine, but if you don't, you'll want to seriously consider purchasing a policy that covers you. Liability coverage is often ignored in the rental industry in favor of its sexier (and more profitable) cousin, LDW, but the risks of not being covered are far greater.
The Ultimate Bottom Line: Be Prepared
Standing at the rental counter on the receiving end of the hard sell on insurance is not the time to think about whether you have the coverage you need. Find out ahead of time what your personal auto insurance and/or credit card covers you for. All coverage is not created equal. Taking the insurance offered by the rental company will provide peace of mind and a minimum of hassle should something happen, but it will come at a price.