What is rental car insurance and do you need it?


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Written by
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Reviewed by
Licensed Auto Insurance Agent
UPDATED: 2019-05-16T01:33:52.892Z
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car rental insurance

Whether you’re planning a long road trip, taking a much-needed beach vacation or need a ride while your car is in the shop, renting a car can be a great choice in many situations. When on a long trip, you don’t have to worry about racking up miles on your own car. And if you’re on vacation far from home, a rental car provides a means for transport for you to get to the things you want to see. Additionally, if your own car is broken down and being repaired, a rental car will keep you on the road in the interim.

But for anyone renting a car, there’s always a question they face: Should you buy rental car insurance?

What does rental car insurance cover?

When you rent a car, the rental car company may ask you if you want to purchase an optional damage waiver, often called a Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW), which is coverage for any damage that occurs to the rented vehicle or if the car is stolen while in your possession.

While it’s technically not an insurance product, it’s a waiver that ensures the car rental company doesn’t ask you to pay for the damages or theft as long as you haven’t violated the terms and conditions agreed upon when renting the car. The terms and conditions include an absence of willful or intentional misconduct from the driver of the vehicle, driving under the influence of drugs or alcohol, participating in racing or any other organized competition, transporting people or property, an act of felony, going off paved roads, among others.

A LDW covers vandalism, theft, fire, collision, and acts of nature that directly impact the rented vehicle. It may save you money in the event of an unexpected loss or damage to the car during the rental period. In most states, without a Loss Damage Waiver, you’ll be responsible for any kind of damage or loss, even if you’re not at fault. Without a LDW, you’ll have to pay for towing, impounding expense, loss of use apart from the full value of the vehicle. A LDW is also mandatory if you don’t already have a comprehensive personal auto insurance policy.

It’s important to know that if you choose to purchase a damage waiver, this only covers damage and theft to the car, and it doesn’t include any liability protection, damage you cause to property or vehicles of others, your injuries and your stolen personal belongings. Additionally, be sure to check with your personal car insurance policy, if you have one, because you may already have coverage for renting a car from your insurer.

The cost of the damage waiver from the rental car company can cost anywhere from $10 to $30 per day. The cost largely depends on the area you’re renting the car in and the rental car company you choose.

Additional rental car insurance coverages

The damage waiver from your rental car company only covers damage and theft of the vehicle you’re renting, but there are many other coverages you should have while renting a car. The following things are not covered by the LDW, but they are important to have coverage for:

  • Damage you cause to others’ vehicles and property
  • Your injuries
  • Stolen personal belongings

Damage caused to others

Liability insurance protects you in case you cause injury to someone or damage another person’s vehicle or property while driving your rented car. Your personal car insurance company provides adequate liability coverage as part of your personal auto insurance, in which case it may not be necessary to buy liability rental car insurance. However, if you don’t have a personal car insurance policy, you should consider purchasing supplemental liability protection. Before you rent a car, be sure to check with your personal car insurance company, if you have one, to see if you will have liability coverage while you rent a car.

Your injuries

You have a few options to choose from for coverage for if you’re injured in an accident while driving a rental car. First, if you have health insurance, this will most likely cover you in the event you’re injured in an accident. Additionally, personal injury protection or medical payments coverage may already be covered under your car insurance policy where the protection is comparable to rental car insurance. Personal injury protection and medical payments coverage takes care of the medical bills that are incurred after a car accident.

If you do not have health insurance, or personal injury protection on your car insurance policy, you can purchase personal accident insurance. As the name suggests, this insurance covers injuries that occur to you or the passengers in the rented car while you are driving it. This type of accident insurance is covered under health insurance offered by leading insurance providers.

Stolen personal belongings

If your rental car is broken into and your items are stolen from the vehicle, your homeowners or renters insurance will cover your possessions, even while you’re traveling. In the event you use your homeowners or renters insurance policy for stolen items, you would be responsible for paying your homeowners or renters insurance deductible before your coverage applies. The value of your items would be covered up until your policy limits.

If you don’t have homeowners or renters insurance, you may be able to purchase personal effects insurance. This type of rental car insurance reimburses the value of any of the belongings such as a laptop, clothes or phones that get damaged or stolen.

Do you need rental car insurance?

This a question you want to answer before the salesperson at the rental car company kiosk pressures you into purchasing rental car insurance that you may not actually need. Many people wonder if rental car insurance is necessary, given the short rental duration, and what exactly the car insurance they already have covers.

When trying to decide if you want to purchase any rental car insurance, consider the policies you already have, including your personal car insurance, health insurance and homeowners/renters insurance. In some states, including California, Rhode Island, Texas, Louisiana, Iowa, Indiana, Hawaii, New York, Massachusetts, Minnesota, and Nevada, the automobile insurance policy must cover the loss of use and damage to the rented vehicle. If your car insurance policy has been issued in these states, buying the damage waiver from the car rental company may not be necessary.

It’s important to check the auto insurance policy you own to see if the LDW provides the same coverage offered by your auto insurance. If your car insurance policy includes comprehensive coverage, the protection most likely extends to the rental car. Additionally, check with the details of the coverage from your car insurance company. Some companies have restrictions on where coverage can be used, such as if you travel outside of the United States.

If you don’t have a car insurance policy of your own or your car insurance company will not cover potential damages to your rental car, purchasing rental car insurance would be helpful to protect you from any damage to the rented vehicle.

Another thing you should research when deciding if you want to purchase rental car insurance is if you have rental car coverage from your credit card. If you use your credit card to purchase a rental car, often times your credit card company will provide coverage for the rental car. Coverage from your credit card goes into effect after your personal car insurance policy, if you have one. Also, if you purchased travel insurance, rental car insurance may have been included in your package, so make sure to check that as well.

Rental car insurance provides important protection for you and the car, but in some cases, you may already be covered. Knowing what rental car insurance covers and what your car insurance protects you from is important so that you can make an informed, smart decision on whether you need rental car insurance or not.


The content on this site is offered only as a public service to the web community and does not constitute solicitation or provision of legal advice. This site should not be used as a substitute for obtaining legal advice from an insurance company or an attorney licensed or authorized to practice in your jurisdiction. You should always consult a suitably qualified attorney regarding any specific legal problem or matter. The comments and opinions expressed on this site are of the individual author and may not reflect the opinions of the insurance company or any individual attorney.

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