Should I buy insurance while taking a rental car? Does my auto insurance cover the rental car?

Should we buy insurance while taking a rental car. While taking a rental car on personal vacation, we are asked to buy insurance, loss damage waiver or a liability insurance. Most of the time, cost of insurance is more than the cost of car rental itself. In most cases, it is unnecessary and redundant expenditure. But you should know your auto insurance and its policies well before declining it the next time you rent a car. To start with, it is important to understand the terminologies:

  • Collision/Loss damage waiver: It is not an insurance but a waiver stating that rental company agrees not to make a claim against you if the rental car is damaged or stolen.
  • Liability Protection: Coverage amount that protects you if you are responsible for damage to somebody else’s vehicle or property
  • Personal Effects insurance: It covers your valuables if they are stolen from your rental vehicle or damaged in a collision.
  • Personal accident insurance: It covers injuries or accidental death while in the rented vehicle and may extend to other drivers or family members riding in the vehicle

Step 1. Determine whether your own policy will cover your rental car: Most auto insurance companies will extend the coverage on your personal auto policy to a rental car. The important fact is whether you have bought comprehensive and collision coverage on your own car. That’s the coverage that pays for damages like scratches, dents and thefts. If you have this coverage on your own policy, it will transfer to a rental. Call your auto insurance company to check – but before you do, keep reading.

Step 2. Find out if your credit card company will cover damage to the car: Many credit cards will pay for damage to a rental car when you pay with that card, but the coverage will be secondary to your own policy if you have one. Your card also may pay for towing – but will never pay for damage or injury that you cause to another car or driver. That’s covered by liability or personal injury protection – which is why having your own policy is so important.

Step 3. Decide whether you’re traveling for business or pleasure: Many employers have corporate coverage for employees who rent cars, so don’t buy the extra coverage unless you’ve checked with your boss or the fleet department first. When you travel for pleasure, your rental car is considered a temporary substitute for the car you’ve left at home – and that’s why the policy you have with your own auto insurance company may provide coverage.

Step 4. Be cautious if you’re leaving the state – or the country: In the United States, insurance laws are different in every state. Policies in some states like Massachusetts may only cover travel within the state. But, in most states, you’re covered as long as you drive in the U.S. However, many policies may limit coverage if you travel to Canada and few will cover travel to Mexico. If you’re traveling abroad, most travel guides recommend buying the coverage with the rental car, because it’s too complicated to deal with insurance in another country.

Step 5. Don’t let a stranger drive your rental car: Or your best friend, boyfriend or teenage daughter. Rental car companies are picky about who drives their car and any coverage you have on your policy from your own auto insurance company (or the rental car policy) may not cover another driver – unless they are listed on the rental contract.

Also, here are some good articles online from Pemco, Geico and Allstate. All of them have policies that cover you.

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