Do I Really Need Rental Car Insurance?

Few things in life compare to the thrill of stepping off a plane in an exotic location. Once you claim your luggage, you head straight to the rental car counter prepared to cruise off into a week of well-deserved rest and relaxation. The only thing standing in your way? One big decision prompted by an age-old question: Would you like to purchase rental car insurance?

In this article, we explore how rental car insurance works, when it’s a wise investment, and when you can pass with full confidence you’re properly covered. 

How Does Rental Car Insurance Work?

Most rental car agreements hold the customer responsible for damages to and theft of the vehicle. However, it’s important to note that circumstances like fire, explosion, and natural causes typically fall outside the customer’s responsibility. 

To account for this, rental companies offer a form of insurance called a Collision Deductible Waiver (CDW). A CDW may or may not be beneficial depending on a variety of factors, including but not limited to:

• Your current insurance coverage
• The terms of the rental agreement
• The terms of your credit card
• Where you’ll be operating the rental vehicle. 

Should I add a CDW to my rental car?

While most of us have rented a car at some point, many people are not quite sure whether to add CDW to their rental experience. In this post, we’ll help you gain a deeper understanding of when and why a CDW is a good investment—and when you can decline CDW with confidence you’ll be covered in the event of an incident.

Does having “regular” car insurance cover me when driving a rental car? 

Most personal auto policies extend liability, medical payments, and uninsured motorist coverage to a rental car. Physical damage will also extend to a rental vehicle provided you have purchased those coverages as an additional part of your auto insurance package. 

Central Policyholders: A Central policy extending full coverage (Liability, Collision, and Other than Collision) to at least one vehicle on the personal policy will provide the same coverage to a rental car. This may render paying for additional CDW coverage unnecessary.

Keep in mind, there are some limitations to take into consideration when it comes to coverage. If a car rental company holds you responsible for Loss of Use (lost rental fees) while the vehicle is being repaired, your policy must have Comp and Collision to provide full protection. Central offers limited coverage for these types of damages, as well as optional endorsements that increase the amount of coverage provided for loss of use.

Will my “regular” car insurance cover me when driving a rental truck, U-Haul, or motorhome?

If you’re renting a truck or a motorhome, coverage depends on the terms of your policy. Check with your insurer for specific details prior to renting a truck or motorhome. 

Central Policyholders: Central’s policy only provides Liability, and a CDW may be necessary. If the rental is a trailer, Central’s policy provides Liability and Property Damage, as well as $1,500 for the trailer.

What factors impact rental car coverage? 

Several factors impact the ability to rent a car, as well as coverage options offered. These include:

• Where the vehicle is being driven (domestic versus international)
• How many drivers are being added to the rental contract
• The age(s) of the driver(s)
• Who the named insured is on the policy. (Many rental car companies will not allow a vehicle to be rented if the driver is not a named insured. For example, a rental company may refuse a driver listed on their parent’s policy.)
• The payment type. (Most rental car agencies require the use of a credit card to reserve and pay for a rental car. The rental agreement will typically include additional language pertaining to this stipulation.)

In addition to the above, banks and credit card companies typically include language in their agreements related to car rental. While automatic CDW and rental car coverage are included perks for many credit cards, it’s important to fully understand the terms of your card, any coverage provided, and how this may impact you when renting a vehicle. 

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Should I add CDW coverage on top of my regular car insurance?

CDW can be a wise additional investment when renting a car. Ultimately, it depends on your current coverage and circumstances. Instances in which it may be worth purchasing include: 

• You don’t have Comp and Collision for any vehicle on your personal policy. CDW can provide extra protection that may save you money and hassle in the event of a rental car incident.
• Limitations on Loss of Use coverage may also make it necessary to purchase CDW.
• Even with appropriate coverage on your personal vehicle, a high-performance or expensive rental vehicle may have a much higher daily or total loss-of-use expense than what your policy provides. If you plan to rent a luxury vehicle, investing in CDW helps ensure you’re fully and properly covered.
• CDW may also be beneficial if your personal policy accounts for ACV (depreciated value) of a rented vehicle. A rental agreement may require the vehicle to be replaced in the event of a total loss, exceeding the ACV value.
• A rental company may also seek diminished value and admin fees if their vehicle becomes damaged. These charges are typically excluded from an insurance policy.

What else do I need to know about rental car coverage? 

Insurance coverage probably isn’t what you want to concern yourself with at the start of a much-anticipated vacation, but understanding the basics of rental car insurance helps ensure you’re well-protected in the event of an incident. 

In addition, here is a list of tips for getting informed and protecting yourself when renting a car:

• Contact the rental company ahead of time to ask exactly what you will be held responsible for under the terms of their rental agreement.
• If purchasing the optional CDW coverage, ask whether it provides coverage for additional drivers such as other family members or business associates. CDW often only covers the person signing the rental agreement, and extra drivers must be added for an additional fee.
• Inspect the rental car for existing damage before driving it off the lot. Be sure the rental company is aware of any damages and notes them in your agreement.
• If paying for your car rental with a credit card, contact your credit card company ahead of time to find out if CDW coverage is automatically included.
• Carry a copy of your personal insurance policy on your trip, both as proof of insurance and for terms of coverage in the event of a loss.
• In the event of a loss, notify your insurer or agent as soon as possible. Typically, you’ll find a contact number printed on your insurance identification card.

Still not sure whether you need CDW coverage? Reach out to a Central agent to explore the terms of your existing coverage and available options. 

The Rental Car coverages described here are in the most general terms and are subject to the actual policy conditions and exclusions. For actual coverage wording, conditions, and exclusions, refer to the policy or contact your Central agent.