Rental car insurance: What’s your best bet?

Gina Roberts-Grey

To buy optional rental car insurance or not to buy? There’s plenty of conflicting information about whether a driver should purchase additional insurance coverage when renting a car.

Some say coverage purchased at the rental counter is money wasted because credit card issuers and auto clubs (such as the AAA) offer insurance on rental cars. Those that sell optional rental car insurance say you might not be fully covered by your credit card or auto club. And some drivers think their car insurer will foot the bill if a rental car is crashed.

So what are the differences in car insurance coverage offered by credit cards in your wallet versus the coverage you can buy at the rental car counter?

Your car insurance

According to the Insurance Information Institute, most typical car insurance policies provide coverage for a driver who’s behind the wheel of a rental car.

“All the coverage on your car insurance policy would be extended to the rental car,” says Brian Boak, an insurance broker in New York.

So if you have towing, glass coverage or comprehensive and collision for your personal ride, that coverage and those coverage limits extend to a car rented in your name and operated by you (or anyone named on your personal policy).

However, the amount and exact type of coverage varies by state and by policy, so check with your insurance agent or car insurance company for details.

Coverage offered at the rental counter

When you rent a car, there are two types of insurance you can buy:

Liability. This covers medical bills for the driver and passengers.

Loss damage waiver. This is another name for “comprehensive and collision,” which covers damage to property including the rental car and, possibly, damage to other vehicles.

Rental insurance at the four major car rental companies — Enterprise, Budget, Dollar and Alamo — starts at $9 a day for a loss damage waiver that covers theft and collision coverage. Tack on coverage for personal injuries and effects (if your luggage is stolen or is damaged in a crash), and you can expect to shell out about $25 a day.

Your credit card

The four major credit cards — Visa, MasterCard, American Express and Discover — offer rental car insurance.

Boak says coverage offered through your credit card is “excess insurance,” or secondary coverage, which means it’s not the primary policy that would take effect in the event of a car crash or car theft. So your own car insurance would be your primary coverage, and your credit card coverage would cover anything not covered by your car insurance, Boak says.

“Coverage differs depending on the card, and in some cases, on which card you have within a network like Visa, American Express or MasterCard. There are even rules regarding road conditions where the accident occurred,” credit card expert and consumer advocate Beverly Harzog says.

It’s a good idea to call your card issuer to confirm that you’ve interpreted the fine print correctly, Harzog says.

Also, keep an eye on the calendar.

With American Express, coverage doesn’t extend beyond 30 days. MasterCard covers only 15 days domestically. “This could be an issue for someone on an extended trip,” Harzog says.

So what will – or won’t – be covered by your credit card and by coverage offered at the rental counter?

Damage to the rental car or the other guy’s car

Credit card coverage. If you crash the rental car or hit someone else’s car with the rental, Discover won’t cover damage that wasn’t caused by the collision. However, Discover’s Escape card does cover physical damage and towing.

Sarah Toffoli, a spokeswoman for Visa, says the car issuer’s collision damage waiver provides reimbursement for damage resulting from a collision or theft up to the actual cash value of most rental vehicles. That means you have to fork over the cash and Visa will reimburse you; the card company won’t pay the rental company for any loss. American Express and MasterCard generally offer some coverage for this, but that coverage varies according to the type of card you have.

Rental car coverage. Damage to the rental vehicle and liability is covered by most major rental car companies, including Enterprise, Dollar, Budget and Alamo.

Theft

Credit card coverage. Discover does not cover theft, but Discover’s Escape card does, as long as you turn in the rental car’s keys as proof that didn’t leave them in the car. MasterCard and American Express also cover theft if drivers can produce the keys.

But with Visa, coverage won’t be in effect if the driver didn’t exercise reasonable care, such as parking in a well-lit area and locking the car doors.

Your credit card coverage might not cover items stolen along with the car, such as luggage or purses.

Rental car coverage. Theft is covered by most major rental car companies, including Enterprise, Dollar, Budget and Alamo.

Towing the rental car

Credit card coverage. Towing charges linked to theft or damage are covered by Visa, as long as the car is towed to the nearest qualified repair shop, Toffoli says. MasterCard, Discover and American Express also cover towing.

Rental car coverage. Coverage varies by rental agency and location, so your best bet is to call ahead and ask whether this coverage is offered.