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Does personal auto insurance cover rental cars?

Fact-checked with HomeInsurance.com

You’re at the counter of the rental car agency — ready for that summer trip you’ve been waiting for, and the desk attendant asks you if you want to purchase insurance on your rental. Your first response might be: “do I need to buy additional insurance when renting a car?”

Depending on the circumstances surrounding your rental situation, it might be a good idea to obtain additional rental car coverage. Let’s take a closer look at the factors that impact your decisions on rental car insurance.

Does personal auto insurance cover rental cars?

Before you ever get to the rental car counter, investigate your own personal auto insurance policy. In many (but not all) cases, you’ll find that rental cars are covered to the extent of your policy’s limits. State Farm, for example, extends coverage to a policyholder’s rental vehicle. 

But read the fine print carefully; there may be higher deductibles for rental cars or exclusions for luxury vehicles, large vans, U-Hauls or other types of vehicle. Your insurer may also include lower liability limits that could leave you liable for expenses after a costly accident.

If you have collision and comprehensive coverage on your personal policy, check to make sure it carries over to rental cars, as this is another area where your insurer may make an exception that could cost you in the long term.

Knowing if your auto policy covers you is good information, but consider this scenario: you’re covered by your own policy and a fender bender leaves a minor ding on the front bumper of your rental. It may not be worth it to file a claim on your policy. You could be out the cost of the repairs anyway if it’s under or close to your deductible, and you’d be adding a claim on your policy which could affect your premiums. This could be especially detrimental if you’re already considered a high risk driver or are paying high premiums due to previous claims or violations. 

Liability coverage

If you have a car insurance policy, liability insurance is included — it’s mandatory in almost every state. But if you are carrying your state’s minimum requirements, which may be as low as $10,000, consider purchasing supplemental coverage from the rental agency.

We recommend having at least $25,000 of bodily injury liability per person, $50,000 bodily injury per accident, and $25,000 for property liability, often written as 25/50/25. This will provide more comprehensive coverage for medical costs or property damage to the other driver and passengers in an accident in which you’re at fault.

Collision coverage

The rental agency will offer you something called a Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW), which usually costs less than $20 a day. If you have robust coverage for collision on your own policy, you might consider turning this down. But if the rental car is worth significantly more than your own car, it’s worth considering opting in.

For example, if your own car is a 10-year-old Ford Escort, which is only worth about $1,000, and you’ve decided to splurge on a Lexus for your vacation, your personal policy’s collision won’t cover nearly as much as the costs you’d incur if the Lexus was damaged or totaled.

Comprehensive coverage

Comprehensive coverage protects you from non-accident-related perils, such as theft and vandalism. As with collision coverage, if you have a high level of comprehensive coverage on your personal policy, you can probably turn down the CDW/LDW. If your own coverage caps out below the value of the car you’re renting, it might be in your best interest to purchase this additional waiver from the rental company.

When should you buy additional rental car insurance?

There are a few other scenarios where you might want to consider purchasing supplemental car insurance for your rental car. These include:

  • If you only have the state minimum liability limits on your personal auto policy. As we noted above, these minimums may not be enough to cover damages or injuries in an expensive accident.
  • If you carry liability only and not collision or comprehensive coverage. Liability will cover medical payments and property damage to the other driver’s car, but not to your own rental. If you don’t have collision or comprehensive, you’d have to pay for damages yourself unless you have supplemental coverage.
  • If you don’t currently have an active personal auto policy. If you haven’t bought or leased your own car, you put yourself in a potentially dangerous situation because you don’t have any coverage of your own — financially, the supplemental coverage offered by the agency could be a life saver.
  • If you only have a named non-owner policy. These policies don’t include collision or comprehensive coverage, only liability, so you could be on the hook for damages to the rental car.
  • If you’re already required to carry high-risk auto insurance and should keep claims or violations to a minimum. To avoid making a claim on your personal policy, supplemental insurance is a must-have.

Rental insurance coverage through credit cards

You may have coverage if you use a credit card to pay. Most major credit cards, like Visa, Discover, MasterCard, and American Express, have some form of car rental insurance. Some cards, like AmEx, offer primary coverage for about $25 per rental, and will pay for damage before supplemental rental insurance or personal auto insurance even gets involved, meaning you don’t have to file claims.

Aside from the costs of repair, the rental agency could also charge for “loss of use,” which can be a significant cost associated with rental damage. No matter how badly damaged, you could be charged what agencies ‘lose’ from being unable to rent the car. Some credit cards exclude this, such as Discover. Some companies, like AmEx, Mastercard, and Visa require rental companies to prove their fleet is over 80% rented while the car is being fixed.

The takeaway

  • Personal auto insurance policies often (but not universally) cover rental cars.
  • Personal auto coverage for rentals may be less comprehensive than for your own car.
  • Account for collision and comprehensive, as well as liability.
  • Your credit card company may also offer rental car insurance.

When renting a car, you’ll want to answer the question: does my auto insurance cover rental cars? Some providers do, but you’ll need to read the fine print to find out. Make sure you have liability as well as comprehension and collision. Otherwise, consider purchasing a waiver from the rental agency that covers you adequately. You may also have some protection through your credit card, if you use it to pay for the rental.

Mary Van Keuren

After 30 years as a writer and editor in academia, Mary now writes full-time for the insurance and finance industries. Her work has appeared on Reviews.com, TheSimpleDollar.com and Bankrate.com, as well as other consumer-focused websites.

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