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Your car insurance is really six separate policies—some are required, others optional—carefully weigh your risks when buying protection for you and your family.
Carole Walker, RMIIA

Rental Car Insurance & Travel Insurance

While you're off to Grandma's house for turkey with all the trimmings, make sure you don't leave home without packing up a little peace-of-mind. There are things you can do to help safeguard your property and your travel plans to help ensure that your trip doesn't have you wishing you'd never left in the first place!

Rental Car Insurance

When you sign a rental contract, you agree that you are personally responsible for:

  • Loss of revenues to the rental agency because the car you rented is unavailable to rent while being repaired, whether or not you are at fault.
  • Damage to the rental car including fire, theft, accidents, towing and road hazards, regardless of whether or not you are at fault.
  • Injuries or property damage you cause to others while operating the rental car.

Be aware: your personal auto policy may not cover all risks related to car rentals.

Before you rent a car:

Check with your insurance and credit card companies prior to renting to determine coverage under your existing personal auto policy or credit card.

If you don't have auto insurance, or not enough coverage, you will need to buy coverage at the car rental counter.

What does my personal auto policy cover when renting a car?

Depending on your policy, most auto insurers cover the occasional use of a rental car up to your liability limit for injuries and property damage that you cause to others as a driver. If you carry collision and comprehensive coverage, some insurers extend coverage for damage you cause to the rental car, subject to your policy deductible. Some insurers do not extend collision and comprehensive coverage to rental cars, so it is best to check with your company prior to renting a car.

How do I determine what I need to purchase, if anything, from the rental agency?

Read any rental contract before signing. People who don't have automatic coverage under their personal auto policy for damage to a rental car, regardless of cause, may buy the optional collision-damage waiver (CDW), or loss damage waiver (LDW). It may have restrictions, such as where you may drive, or driving after drinking any amount of alcohol, and may not provide coverage for drivers not listed on the rental contract.

Even if you do have insurance coverage for damage to a rental car under your personal auto policy, you might consider purchasing the collision-damage waiver if you are renting for business purposes, or if you want to avoid possible rate increases to your own insurance policy as a result of a claim for which you are responsible.

What is collision damage waiver (CDW), or loss damage waiver (LDW)?

It's an agreement with the auto rental agency under which the rental company will not hold a renter or authorized driver liable, in whole or part of your primary insurance deductible, due to loss or damage to the vehicle. It is offered at the time of rental for an extra fee.

Don't my credit cards protect me when I rent a car?

Some do, some don't. Most credit card coverage does not pay for damage to a rental car until you prove in writing that your personal auto policy will not provide coverage. Before you rent the car, it's a good idea to call your credit card company to find out for sure.

The best coverage from credit cards have primary coverage, meaning they pay for damage to the rental car first and ignore your personal auto policy, and have no exclusions or restrictions. Some credit card companies pay coverages as a deductible waiver, so your insurance will still be primary. Read the policy offered by your credit card company, or call your company prior to renting a car to verify what is covered. If it pays first and has no exclusions that concern you, use the credit card coverage and decline the coverage offered by the rental agency.

What is "loss of use" coverage?

If you return a rental car with damage, "loss of use" is a dollar amount charged daily by the rental agency while the car is out of service for repair. You may be covered under your personal auto policy, but only if loss of use coverage is included in your personal auto policy. Even then, know what your policy limit is. If you purchase the optional collision damage waiver coverage from the rental agency, loss of use may be covered. Always check with your insurer to verify what is covered before purchasing optional coverage from a rental car agency.

Do I have other options for purchasing rental car insurance?

Some auto insurers will provide short term coverage for rental cars, if you are not already covered on your personal auto policy. Contact your current auto insurer and provide a description of the vehicle you are renting, the name of the rental agency, and the length of the trip, and ask about comprehensive and collision coverage for the rental car.

Does my personal auto policy cover me in all states and abroad?

No. Ask your insurer about state laws that may affect your coverage. No policy sold in the United States provides coverage outside the U.S., its territories, or Canada. When renting abroad it is advised to buy all coverage from the rental agency including liability for injury and property damage. Foreign laws vary. Mexico, for example, does not recognize U.S. insurance.

What if I rent an RV?

Motor homes and vans are expensive vehicles, so be careful about the insurance coverage. Before you rent the vehicle, call your insurer to verify what your personal auto policy covers: injuries and property damage caused by you to others, damage to the rental, and loss of use revenue. If you don't have automatic coverage, arrange for coverage for the length of your trip. Be sure to disclose all drivers.

Consider Travel Insurance

Vacations are often a big-ticket item, so you may want to consider buying some extra peace-of-mind in the way of travel insurance. This will cover your costs, minus the deductible, if the cruise or tour operator goes belly up or you need to cancel due to illness, a death in the family or other disasters spelled out in your policy.

There are four major types of travel insurance:

1. Trip Cancellation Insurance
This would reimburse you if the cruise line or tour operator goes out of business. It would also provide coverage if you have to cancel the trip due to sickness, a death in the family or other calamity listed in the policy.

In addition, if you or an immediate family member becomes seriously ill or is injured during the trip most policies would reimburse you for the unused portion of the vacation. The cost is generally 5% to 7% of the price of the vacation, so a $5,000 trip would cost roughly $250 to $350 to insure.

Trip cancellation is very different from a Cancellation Waiver that many cruise and tour operators offer. Waivers are relatively inexpensive, costing approximately $40 to $60. They provide coverage if you have to cancel the trip, but they have many restrictions. They must be purchased when you book the trip and will usually not cover you immediately before departure (the time period most people cancel) or after the trip has begun. Most importantly, waivers are not insurance. Cancellation Waivers are not regulated by the state department of insurance, so if your tour or cruise operator gets into financial difficulty, you may not be able to collect.

2. Baggage Insurance or Personal Effects Coverage
This would provide coverage if your personal belongings are lost, stolen or damaged during the trip. To insure $1,000 worth of personal belongings for a week, it would cost roughly $50 per year.

Before purchasing this type of coverage, find out how much insurance the airline or trip operator provides for your belongings. Also, check your homeowners or renters policy. It will usually provide coverage for off-premises theft. Therefore, if your luggage is stolen, your insurer will pay to replace it, less the deductible.

3. Emergency Medical Assistance
This provides insurance and medical assistance for travelers. It would cover you if you had to be airlifted off a mountain due to a skiing or hiking accident or had to stay for a prolonged period of time in a foreign hospital. It would also provide coverage if you got seriously sick or were injured and needed to be flown home. Some commercial airlines require very sick passengers to travel on a stretcher with a doctor. This means that you might have to purchase 10 or more seats on a plane at a possible cost of over $10,000.

Before purchasing this type of coverage, check with your own health insurance carrier. Find out what type of coverage you have when traveling abroad and if there are any limits. Also, ask if it will pay to fly you home or to a country with first-rate medical care.

4. Accidental Death
This would provide a variety of coverages if you or a family member dies on the trip. If you have a good life insurance plan or made other financial provisions for your loved ones, this may be duplicate insurance.

Your credit card company may also provide travel-related services and coverage. You can also purchase travel insurance from either a travel agent or you can buy directly from an insurer that specializes in this type of coverage.

Your credit card company may also provide travel-related services and coverage. You can also purchase travel insurance from either a travel agent or you can buy directly from an insurer that specializes in this type of coverage.

To find out how to protect your home while away, click on Home Security Tips.

Additional Information