You're standing at the car rental counter and the agent is giving you his best hard sell by terrifying you into believing you need an insurance package that costs more than the rental itself. Do you cross your fingers and decline the coverage? Or do you play it safe and pay for insurance that effectively doubles the cost of your rental car?
Here's a quick guide to help you cover your bases confidently when renting in the United States.
Car Rental Insurance, the Easy but Expensive Way
When it comes to car rental coverage, the most expensive but safest option is to opt for the rental company's Loss Damage Waiver (LDW, sometimes called Collision Damage Waiver or CDW).
At $20 to $30 per day, the LDW can feel like a huge rip-off. Some states—most notably California and New York—have laws limiting the price of LDW, but in most of the country, you can expect to pony up double-digit dollars every day.
If you take the LDW and the rental car is stolen or you have an accident, you're covered. The car rental company will waive any repair costs if the rental car is damaged, provided that the car has not been driven recklessly or by an unauthorized driver. Better yet, an LDW will waive an array of other costs associated with a damaged rental car, including loss of use, diminished value, administrative fees, towing charges, and even pro-rated license and registration fees. These administrative fees can add up quickly, and there is value in not having to worry about them.
Alternatives to Ponying Up for Car Rental Insurance
Paying through the nose for the rental car company's collision insurance isn't the only game in town. Here are some other options:
Coverage Through Your Personal Auto Insurance Policy
If you're risk averse, it can be easy to default to the rental company's LDW, but in fact you may already be covered. If you have personal auto insurance, the policy will usually cover rental cars. Check with your insurance provider. If your policy extends to rental cards, then a LDW would duplicate coverage.
On the other hand, if you get in an accident after declining the LDW, you'll have to pay the deductible and filing a claim might drive up your insurance premium.
Coverage Through Your Credit Card
Many premium credit cards provide car rental insurance if you pay for the rental with that card. It's important to realize that not all coverage is created equal.
Some cards offer "secondary" coverage, which means that the credit card company will only pay out after your personal auto insurance policy has been exhausted (assuming you have such a policy). You would still have to file a claim with your auto insurance company, and your credit card would pick up only the deductible. (Some credit card policies may include their own deductible.)
Other credit cards provide primary collision coverage. In that case, the credit card provider would pay out without your having to involve your auto insurance company at all. One caveat is that credit cards often have many conditions on when they will pay out. For example, some won't cover SUVs, vans, or luxury cars. Some exclude rentals in certain countries. Many won't cover car rentals longer than 15 days. Often extra fees such as loss of use, diminished value, and administrative fees aren't covered, either. In other words, credit card companies like to stack the deck so they are able to avoid having to pay out.
Premium Coverage from American Express
American Express offers Premium Car Rental Protection for its cardholders. Every time you rent a car, your Amex card is automatically charged a flat $24.95 ($17.95 for California residents).
Unlike most credit cards, American Express's premium protection is primary coverage, so 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 a 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.
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 a daily fee, while Amex's Premium Protection is a single fee regardless of the length of the rental.
If you don't have a credit card with free primary car rental coverage, you can add this coverage on to any Amex card you currently own. Even if you have a personal auto insurance policy, the Amex coverage will provide an extra measure of protection and keep your insurance company out of the loop should anything happen.
Third-Party 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 of your trip for much less than the rental companies charge for LDW. AutoSlash is proud to partner with Sure to provide inexpensive collision damage coverage for much less than you would pay at the rental counter.
Other well-regarded travel insurance companies, including Allianz and Travelguard, also 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.
Don't Forget Liability Insurance
All of the insurance options above cover your rental vehicle, 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.
State minimums may cover fender benders, but in a more serious accident, you could 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.
At the rental counter desk, you can opt for Supplemental Liability Coverage (SLI or SLP). For a fee of $10 to $15 per day, SLI will supplement the state-mandated coverage, 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.
It's practically unheard of for a credit card to include 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 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, which appears to be very familiar with non-owner policies.
If you live in 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.