Rental Car Insurance: Do You Need It?

By the Mercury Team

When traveling to a new destination, whether for business or pleasure, renting a car is a great convenience. It also provides peace of mind if your vehicle is temporarily out of commission due to service or a collision.

One of the most commonly asked questions when renting a vehicle is: Do you need insurance to rent a car? While it’s not mandatory to get rental car insurance, not having it can leave you financially vulnerable in the event of an accident.

“When you rent a car, the rental agency has only a nominal amount of protection for liability claims,” said Kevin Quinn, Vice President of Auto Claims at Mercury Insurance. “That means if you get into an accident, you may be responsible for significant charges.”

Let’s explore the ins and outs of rental car insurance to help you decide whether it’s worth getting.

What is rental car insurance?

Rental car insurance is a type of auto insurance you can purchase from a rental car company. It’s designed to protect you financially if the rental car is damaged or stolen, or you’re involved in an accident while driving it.

Here are some of the types of rental car insurance offerings your chosen company may offer:

Liability coverage: This covers damage to other vehicles and property, as well as injuries to other people if you’re at fault in an accident. Rental car companies are required by law to provide the minimum level of liability insurance required by state laws, but the coverage is generally minimal, so you may want additional protection.
Loss damage waiver (LDW): Many insurance companies don’t provide a Loss Damage Waiver (LDW), so you may want to consider purchasing this additional coverage. These waivers are a “get-out-of-jail-free” card that absolves drivers of liability for theft of—or damage to—the vehicle. The extra charge is added to the daily rental price, and the standard fee typically ranges between 25 and 40 percent.
Personal accident insurance (PAI): This covers medical costs for you and your passengers in case of an accident. If you have health insurance, medical payments coverage, or personal injury protection, you may not need to purchase PAI, especially if your coverage is more comprehensive than what the rental company offers.
Personal effects coverage (PEC): This insures against theft of personal items from the rental car. Again, if you have homeowners or renters insurance, you might not need PEC to protect your belongings.

Does my personal car insurance cover rental cars?

Whether your car insurance covers rental cars depends on your specific policy and the coverage you have. Many auto insurance policies do extend coverage to rental cars, but it’s important to verify the specifics of your policy. Here are some key points to consider:

Liability coverage: Liability coverage from your auto insurance policy usually extends to rental vehicles. Supplemental liability insurance is available at the counter with a limit of $1 million, but you should look into the liability coverage provided by your personal auto insurance before purchasing additional insurance.
Collision and comprehensive coverage: Typically, your personal auto insurance collision and comprehensive coverage extends to rental vehicles if you purchased that coverage as part of your personal auto insurance package. What is collision coverage? It pays for damage to the rental car, regardless of fault. Comprehensive insurance protects against non-collision damage like theft, vandalism, fires, floods and hailstorms. If you’re involved in any of these scenarios, you’ll most likely have to pay the deductible – $250, $500, and $1,000 deductibles are common – before your insurance company will pay out any money. Speak with your insurance agent and check your policy for specifics.
Exclusions and limitations: It’s important to check for any exclusions or limitations in your policy. Some policies may not cover rental cars for certain purposes (e.g., business use) or in certain locations (e.g., outside the country).

Does my credit card offer rental car insurance?

Did you reserve and pay for your rental car with a credit card? If so, you may be able to reap some rewards. According to NerdWallet, all four major credit card companies – Visa, Mastercard, American Express, and Discover – offer rental insurance benefits. These policies vary by company, so look into coverage details and limitations because many provide secondary coverage. This means that if you need to make a claim, you must go through your insurance company first. The credit card would then cover costs your insurance company doesn’t — up to the limits stated in your credit card agreement. Some cards, like the Chase United Mileage Plus Explorer cards, provide primary coverage, which means you don’t need to go through your insurance company.

Rental car insurance tips

Here are some tips to help you manage rental car insurance effectively:

Review your existing policies: Before you rent a car, review your personal auto insurance policy and your credit card benefits. Understand the coverage you already have and identify any gaps that might need coverage from the rental agency.
Keep documentation handy: In case of an accident, having your insurance information, rental agreement, and any coverage details from your credit card company easily accessible will streamline the process of making a claim.
Understand the claims process: Know how to file a claim with your personal auto insurance, credit card insurance, and the rental company’s insurance. Understanding the steps involved can help make the process smoother if you need to file a claim.
Inspect the rental car: Before leaving the rental lot, inspect the car for any existing damage and ensure the rental company notes it. This can prevent you from being wrongly charged for damage you didn’t cause.

Do I need rental car insurance?

If you don’t want to rely on your own insurance policy and didn’t book the vehicle through a major credit card with rental car coverage benefits, purchasing insurance through the rental company can be a good idea. However, an important thing to consider is the claims process. Accidents may still impact your primary auto insurance premium. If you’re taking advantage of credit card rental insurance benefits, you’ll also have to consider the company’s claims process.

Contact your Mercury Insurance agent and credit card lender to feel confident in your decision when you leave the counter with your keys.

Mercury Team

The Mercury Marketing Team is made up of professionals in the fields of Content Creation, Public Relations and Social Media. The team works together to deliver professionally written and researched content to provide information for consumers.