Most U.S. residents who own a car and have car insurance will be covered when they rent a car as well. You don’t need to buy any extra coverage — it works just like if you were driving your own car, if something happens you file a claim with your insurance company. Of course, it’s worth making absolutely sure that your policy covers you in a rental vehicle. Ask your insurer once and have peace of mind.
Still, it’s nice to have even less liability when you rent a car than when you drive your own car. Especially since you’re probably driving a rental car in an unfamiliar place.
So I thought it was worth walking through ways to have that extra protection quite inexpensively.
First is to understand the difference between liability for damage you might to do someone else, or to someone else’s property, and damage you might do to your rental car.
Your car insurance will usually cover you for liability of you hurt someone or something. You can buy additional coverage from your car rental agency. But the rest of these tips don’t help you with that sort of liability. The rest of these tips only help you avoid the costs associated with damaging your rental vehicle.
Collision Damage Waiver from Your Rental Company
Your rental agency will gladly sell you a product that says you aren’t liable if you damage their vehicle, technically they waive their right to collect damages from you. There may be a deductible or ‘excess’. And they’re quite happy to sell you this product because they make good money on it, it’s expensive — too expensive — at least to the extent that there are cheaper ways to obtain a similar benefit.
And remember that if you have car insurance you probably don’t need it. If you damage a rental vehicle you ring up your insurance company. You may not want to file a claim, but you didn’t want to wreck the car either.
You’d think that only people who planned to or were likely to wreck their cars would take the coverage (‘adverse selection’). They’d grab the coverage and play adult bumper cars. But it turns out that more risk averse people (who are also less likely to have accidents) buy the coverage. And it works out quite handily for the rental companies.
I never buy a rental car company’s collision damage waiver. I hate renting from Enterprise because of the hard sell for this product, and the walk of shame around the vehicle before getting the keys followed by the close inspection on return.
Credit Cards That Offer Primary Collision Damage Waiver
There are some credit cards that will offer you collision damage waiver coverage just for paying for the rental with their card.
Some cards even offer this coverage as primary, meaning it kicks in before any other insurance applies. In other words, renting a car with this card and if you damage the vehicle your insurance company likely doesn’t even need to know.
Some cards which offer primary collision damage waiver:
- Diners Club. Unfortunately cannot currently be applied for.
- United Explorer. This is a legacy benefit from the Continental MasterCard, and is a great selling proposition for the card. If you rent cars frequently, you should probably have this card — even if you never put any other spending on it. (Benefit also applies to United Club Card.)
- JP Morgan Palladium Card. You need to have a ‘private client’ relationship with Chase in order to get this card.
This won’t cover all possible expenses. A rental car company may tack on an administrative charge for fixing their vehicle. They may hit you with loss of use charges (rental fees for while the car can’t be used by potential customers as it’s being fixed), and the credit card company may not want to pay those without proof that the rental agency was sold out of cars during the given period of time (and thus were denied revenue they might actually have earned). In other words there may be some back and forth between the rental company and your coverage that leaves an uncovered amount you might have to pay or fight over. But the vast majority of your exposure is covered.
Credit Cards Which Offer Secondary Collision Damage Waiver
Secondary coverage means that whatever other insurance exists pays first, and the secondary offering picks up uncovered costs. In practice this works out to being the your insurance company will usually pay most of the damage, and the card company’s policy winds up paying your deductible.
Most premium credit cards, and certainly mileage, cards offer at least secondary coverage.
Some like business credit cards will offer primary coverage when renting for business purposes (that’s how the coverage works for the Chase Ink premium cards) but secondary for personal purposes. Some are primary outside the United States and secondary inside, although renting in certain countries may be excluded from coverage.
If you do not have your own car insurance policy, then a secondary coverage for collision is effectively primary. (When you rent a vehicle, it will generally come with minimum legal required coverages, that would be primary, and this would cover the additional most of the time.)
Having your own auto insurance policy that covers you in a rental vehicle means that any sort of collision damage waiver isn’t really required, secondary coverage makes you ‘fully’ covered, and primary coverage is nicer but probably not worth paying much more.
What Do You Have to Do To Take Advantage of This Coverage?
You have to pay the entire cost of the rental with the card whose coverage you want to use. That means not renting through a site like Priceline that charges you for the rental, and then in turn pays the cost of the rental to the car hire agency. It means not splitting the rental onto more than one credit card. And it means not redeeming for a free rental, you need to generate a credit card charge and just paying the tax doesn’t suffice.
Of course even if it’s a free rental, since rental charges aren’t usually prepaid, you could probably return the car and have the agency process the full rental cost notwithstanding that you were going to use free rental credits. You might have to forfeit those credits but the savings by taking advantage of credit card coverage in the event of an accident would likely be worth it.
You also need to make sure not to rent an abnormally expensive vehicle, or rent for too long. Different card coverage programs limit you to rentals of 14 or 30 days, and to vehicles selling for a maximum amount (that I’ve never hit even when upgraded).
And you need to decline the rental company’s collision damage waiver offer, if you pay for that coverage your card won’t also cover you (but then you wouldn’t need it to).
What If I Want Primary Coverage and My Card Doesn’t Offer It?
American Express has for years offered primary coverage for a flat fee. The price is higher than it used to be at $24.95 per vehicle, but car companies often sell you their coverage at nearly that price per day and American Express charges that per rental up to 42 days.
It’s cheaper at $17.95 for California residents, and the length of rental this covers is shorter at 30 days for Washington State residents.
The option also covers theft of the vehicle, something different card coverages handle in different ways (eg some will exclude theft coverage if you leave your keys in the vehicle).
I tend to think this offers pretty good value if you don’t have your own coverage or want primary coverage and don’t have a card that comes with it — although I think a better value here is the United Explorer card if you rent frequently.
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