Renting a car? How to make sure you aren’t paying too much for insurance

When you rent a car and get to the rental counter, one of two things happen:

  1. You assume you’re insured, by your home policy or by your credit card, and you don’t buy additional coverage.
  2. You don’t know if you’re covered or not, the rental counter says you aren’t, and you buy coverage on the spot for way too much money.

This is not ok! Rental car companies design their websites and policies to be cryptic and misleading so they can scare you and rip you off! Your home policy or credit card may cover you but there are lots of caveats to be aware of.

We’ve rented a lot of cars in the past year. Here’s what we’ve learned:

bmw

Our rental car in Tasmania

  1. If you own a car and have a car insurance policy in the United States, it probably will extend to cars rented in the United States or Canada. However, your home policy won’t extend abroad. If you think your policy does, call your insurer and see it in writing.
  2. If you don’t own a car and you have a non-car-owner policy (like me), then your auto policy will give you liability insurance when renting a car in the United States and Canada, but not collision.
  3. Credit cards offering car insurance give you collision insurance only, not liability. This is a huge gap in coverage!
  4. Many credit cards only offer secondary insurance (kicks in after other coverage is exhausted), and exclude many countries from coverage. Read the fine print before you depend on this coverage.
    • Premium credit cards like Chase Sapphire and Citi Prestige offer free primary collision insurance worldwide with no exclusions. Surprisingly, even American Express has restrictions so I don’t use them for car rentals.
  5. Car rental websites don’t make it clear what insurance is included because they want to upsell you on extra coverage later. Don’t fall for it. Understand what is and isn’t included in the base price.
  6. In many European countries, Australia, and New Zealand, there are strict laws about what car insurance is required to drive. Therefore, we’ve found that most rentals include liability insurance. In many countries, it’s called “third party insurance”.
  7. Collision insurance is almost never included in the base price for a rental car, but if you select the option at the time of renting online you can add it for just a few dollars per day. The key here is to buy it online, not at the counter.
  8. People who work at rental counters are clueless. They have very little training in insurance, so you should never plan on asking them questions or making decisions at the counter.
  9. Collision insurance (covers your car) is also known as a Loss Damage Waiver. There’s a deductible and you’re covered beyond that amount. Often when you walk into a rental office and ask “does my rate include insurance?” the employee will say “no” because technically an LDW isn’t insurance. But they serve the same purpose so don’t be fooled.
  10. You should always print your car rental invoice/receipt and take it with you to the rental counter. Make sure the rental agreement you sign in person matches your invoice. There should be no ambiguity.
  11. We’ve found that autoeurope.com and sixt.com generally do a good job of detailing what insurance is included when you are renting online. We use hertz.com a lot too but you have to really dig into the fine print to understand insurance.

Bottom line:

Dealing with car insurance sucks. But if you do a little research and planning up front you can save a ton of money. Once you do this a couple times, it becomes pretty easy to find the fine print you’re looking for.

I don’t own a car, but I have a non-car-owner auto policy that gives me liability coverage when renting in the Unites States. That doesn’t include collision so I pay for the rental with my Chase Sapphire Reserve card to get that coverage.

When I rent a car abroad, I always get full insurance from the rental company. I only book on websites that make it very clear what insurance is included. And it’s usually not much more money as long as I do this at time of booking.

Using the rental company for collision insurance (vs my credit card) is also more convenient. If I get into an accident: I can simply pay the rental company the deductible and walk away. If I use my credit card for insurance, I’ll have to pay the rental car company the cost of the damages and get reimbursed later.

If you have other thoughts, tips, feedback please post it in the comments.

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autoeurope.com searches across many rental car companies like Hertz and Sixt. It does a great job of clearly showing you what insurance is or isn’t included so I always start here.

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Sixt.com sends you an PDF confirmation that makes it clear what insurance you have on your rental. Take this with you to the counter. Once the counter agent claimed we had no insurance purchased. Luckily we had proof!

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Hertz is pretty sleazy. You can’t tell what insurance is or isn’t included by looking at this confirmation page, even in the Terms and Conditions fine print.

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Once you open the 22 page rental agreement on Hertz.com, you can see that all rentals in Europe include third party insurance, and most include collision insurance. Most people won’t know this and they will be sold additional coverage at the counter.

 

Appendix

Definition of Collision Insurance, also known as a Loss Damage Waiver

“Collision” insurance covers your car, the one that you rented. There’s no stated upper bound, because the upper limit is the full value of that car (say, $10,000 for a Corolla). Collision insurance has a deductible, the amount you would need to pay in the case of an accident. It’s usually in the hundreds or low thousands of dollars.

Collision insurance might also be called a “loss damage waiver.” It means the car rental company is waiving their right to collect money from you above a certain amount. It’s the same thing, but different legal lingo.

Definition of Liability Insurance, also known as Third Party Insurance

Liability insurance, or third party coverage, insures other cars and people in the case of an accident. Liability insurance has no deductible, but it does have an upper limit which is usually in the hundreds of thousands or millions of dollars.

This insurance is *more* important than collision because of the risk: your Corolla rental may only be worth $10,000, but if you hit a Ferrari and the driver is injured, you could be sued for millions!

This is probably getting into the “super paranoid” territory, but I only rent cars from large, international rental chains. That’s because insurance is only valuable if the company insuring you is able and willing to pay a claim. If they don’t, you’re on your own. Example: I believe Hertz will pay my claim if I have an issue, but a mom and pop rental shop in Greece might not be able to pay a $1M claim.

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