What is rental car coverage and how does it work?

It's usually a standard question at a rental car company counter: "Do you need rental car insurance?" Considering the rental car company has insurance on their car, you have insurance on your personal car and you may also have rental coverage available through your credit card, what should you do? This type of “insurance”, technically a waiver, may help to cover costs should the car become damaged or incapacitated during your rental time. Here's how to sort out the specifics.

What is rental car insurance coverage?

Typically, coverage through a rental car company falls into five categories:

• Collision damage waiver (CDW) or Loss damage waiver (LDW): Releases you from damages that occur to the rental car, including vandalism and theft.
• Liability: Provides coverage for damages or injuries you may cause with the rented vehicle.
• Personal accident insurance (PAI): Protects you and your passengers should injuries occur while driving the rental car.
• Personal effects coverage (PEC): Covers personal items that may be stolen from the rented vehicle.
• Roadside assistance: Covers emergency roadside expenses, lost keys and travel assistance.

Do I need rental car insurance?

Many personal vehicle insurance policies already include some sort of car rental insurance coverage — so if you purchase a rental car policy, you're paying extra when you may not have to. Let your State Farm® agent know the reason for the rental so they can help assess how coverage from your personal vehicle policy might apply. Then, ask your agent these key questions:

• How much Liability, Comprehensive and Collision coverage do I have on my personal vehicle? The coverage you have on your personal vehicle may also extend to your rental car.
• If my car insurance has high physical damage coverage deductibles, are rental cars adequately covered? Sometimes they’re not.
• If I have roadside service, are towing and administrative fees also extended to the rental car?
• If items are stolen from the rental car, does homeowners or renters insurance cover the loss? This is sometimes referred to as off-premises coverage.
• Does my personal auto policy cover loss of income coverage? If the vehicle becomes damaged during your rental time and repairs are needed, the company may charge you for the vehicle's potential earnings while it's being repaired.

Does my credit card cover rental car insurance?

If you pay for a rental car with a major credit card, the card issuer may offer secondary car rental insurance at no charge. In general, this coverage will be used after your personal auto insurance policy is used. Keep in mind that credit card coverage varies from card to card and the institutions which issue the cards. This coverage typically only helps with additional expenses such as reimbursing your insurance deductible. Exotic, expensive or larger vehicles may not be covered by credit cards.

Refer to your card’s website for information about available rental car coverage or call the number on the back of the card to inquire.

Review your rental coverage options

Don’t sign anything or agree to coverage without reading the policy thoroughly. Insurance requirements and rules vary from state to state.

• Unless your auto insurance coverage adequately extends to rental cars, you may need to get some kind of insurance coverage from the rental organization. In place of collision or comprehensive car coverages, you may be able to obtain a rental car company loss damage waiver, or LDW, which can help cover damage-repair costs, administrative fees and towing.
• If you don't have health or medical payments coverage on an existing policy, you may be able to purchase personal accident coverage.
• If your personal auto policy doesn’t include emergency road service or first party medical coverage such as personal injury protection (PIP) or medical payments coverage (MPC), consider purchasing these.

What if I’m using a car sharing or a peer-to-peer service?

• According to the Insurance Information Institute (III), coverages can vary greatly. If you're renting from a nontraditional car sharing company, review the agreement carefully. While insurance is sometimes included in the fee, there may be restrictions or extra costs, particularly if the car is stolen.
• Consider discussing coverages with your insurance agent and inquire with the service you’re renting from.

Do I need international car rental insurance when abroad?

Contact your agent and credit card company well in advance of your trip. Paying for international coverage might help if you have an accident or the vehicle is stolen while traveling abroad.

Renting for work or play?

Coverage extensions from your existing policy or your credit card may not apply if you're renting a car for business. In that case, review the coverage options through your employer.

Select the right size rental vehicle

When reserving a car, know how many people will be traveling with you and how much luggage room you will need. You'll want to have enough space to see clearly out of each window and to keep passengers comfortable. Remember, middle seats are often small for adults but typically fine for children, unless car seats are needed. If you need room for more than four adults, consider choosing a vehicle with a third row.

Inspect the rental car

Give the car a once-over to check the following before driving off:

• Prior body damage
• Tire pressure and condition
• Brakes
• Seat belts
• Lights
• Windshield wiper condition and wiper fluid level

Also double-check that the car is equipped with important safety features, and verify that the add-ons you agreed to are present and functioning appropriately.

Now that you have read about car rental insurance coverage, you may also be interested to learn about summer driving tips, how to be careful in rest areas or suggestions to prevent falling asleep while driving.