What is rental car insurance?

After a great vacation, you pull into the rental car lot to return your vehicle. But, as you get out, you realize there is a long, deep scrape along the driver's side door. Luckily, you bought coverage at the counter, so the damage should be covered.

In a booming rental car market with more than 2.2 vehicles on the road, such a scenario is not far-fetched. The 10 leading companies reported revenue of more than $38.4 billion in 2023, up from $36.6 billion in 2022, according to Auto Rental News.

Rental car insurance can provide critical protection against damages or injuries while driving a rental vehicle, but it can be costly. And in many cases, your existing auto or homeowners insurance policy or credit card may already provide sufficient coverage, making buying rental coverage unnecessary.

Key highlights

• If your car or home insurance policy or credit card cover rentals, you may not need rental car insurance.
• However, if you have a liability-only policy or low coverage amounts, your personal policy may be insufficient in the event of a major incident
• Rental car insurance rates vary based on location, car and selected coverage, but in general is more expensive than a standard car insurance policy, coting up to $60 per day or more.
• Some private insurers also sell rental car insurance, and the cost may be lower than if you buy coverage at the rental counter.

What is rental car insurance?

Rental car insurance is an optional form of temporary insurance you can buy from the rental company. It protects against financial losses due to accidents, theft or physical damage to the car during your rental period, similar to the way a standard car insurance policy would cover your personal vehicle. Unlike a traditional car insurance policy, which lasts for six or 12 months, rental car insurance only lasts for the duration of your rental period.

What does rental car insurance cover?

Rental car policies usually have four parts, according to the National Association of Insurance Commissioners (NAIC). You can choose to purchase coverage a la carte or combine them.

• Collision damage waiver, also known as loss damage waiver, covers the cost of repairs or replacement of the vehicle after a collision.
• Liability insurance applies to injuries or property damage that you cause to others. Liability insurance protects you against lawsuits or medical bills that occur if you're in an accident and the other driver is injured or their car is damaged.
• Personal accident insurance provides coverage for medical bills for yourself and your passengers if you're hurt in an accident.
• Personal effects coverage protects your personal belongings in the rental vehicle. If the car is broken into and thieves steal your luggage, sports equipment or other valuables, this coverage will reimburse you for some or all of the items' value.

What doesn’t rental insurance cover?

When purchasing rental car insurance, read the fine print. The coverage won't apply to the following scenarios:

• Intentional damage: If you intentionally damage the car out of frustration or for some other reason, you'll have to cover the repairs out of your own pocket.
• Driving under the influence (DUI): If you're in an accident or otherwise damage the vehicle and are found to have been driving under the influence, the insurer will refuse to pay out the claim.
• Reckless driving: Racing is a dangerous activity on public roads; if the rental company suspects you of racing the vehicle, it will deny your claims.
• Driving the car outside of the country: Most insurers only cover the rental car when you're in the country. If you plan on driving across the border to Mexico or Canada, you may not be covered. Check with the rental company first.
• Commercial use: Rental car insurance doesn't cover cards used for business purposes, including cars rented for rideshare or side hustle platforms like Uber or DoorDash.

How does car rental insurance work?

Car rental insurance works the same way as a regular vehicle policy: In exchange for paying a premium, the insurer agrees to indemnify – or protect – you from financial losses in the event of a covered event, up to policy limits.

When you book a rental vehicle or pick it up at the rental counter, you have the option of adding insurance coverage through the rental company. You can usually select from several options or insurance packages. The cheapest policies will provide only collision coverage, while more robust packages will include collision, supplemental liability and personal effects insurance.

Coverage is usually priced on a per-day basis, and the package you choose applies for the entirety of the rental period.

If you're in an accident or the rental vehicle is damaged while in your possession, review your rental policy for instructions. Typically, the company will require you to notify them right away, and you may need to provide photos and the police report number (if applicable).

Do I need rental car insurance?

If you have an existing car insurance policy for your own vehicle, your coverage will likely extend to a rental car at no added cost

"There is no additional premium [to cover a rental vehicle] as rental car coverage is typically included in standard auto insurance policies," said Mark Friedlander, director of corporate communications with the Insurance Information Institute (Triple-I), an insurance industry trade and research organization.

Generally, policies follow the driver, regardless of the car they’re using. But don’t automatically assume your policy is adequate to cover a major mishap

"It is not necessary for these drivers [with their own policies] to purchase additional coverage from the rental car provider unless they only carry state minimum liability coverage,” Friedlander says. “That would not cover collisions with another vehicle or stationary object and non-collision (comprehensive) types of losses such as theft, vandalism, fire, weather hazards and cracked windshields."

For example, if you drive an older or high-mileage vehicle, you may have a liability-only policy or a very low collision coverage limit. If you rent a higher-end vehicle, such as a full-size SUV or a luxury car, your current insurance won'twouldn't provide enough coverage, so you may need to buy a separate rental insurance policy.

It’s worth noting that while your car insurance will provide protection for property damage and medical bills, it will not reimburse you for the loss of personal property, should it be stolen from your rental car. In this case, personal property claims would be covered under your homeowners or renters insurance policy, up to your coverage limits and minus any deductible.

Contact your agent or insurer's customer service department to find out if your policy extends to rental cars and to see if you have adequate protection for the type of car you intend to rent.

Is rental car insurance worth it?

If you don't have an existing car insurance policy, yes, rental car insurance is a necessity.

"Most car rental agencies will not allow a rental without proof of coverage that extends to the vehicle during the rental period," said Ezra Peterson, senior director of insurance with Way.com, an app that helps drivers save money on car expenses like gas, parking and insurance.

Even if you do have personal car insurance, it may provide sufficient coverage to repair or replace a newer vehicle such as a rental car. If that is the case, rental car insurance may well be worth the price, says Peterson.

Rental cars tend to be newer vehicles; they're usually the current model year or just a year or two old. As a result, they can be pricey to replace, so rental coverage is well worth the expense.

For example, the Nissan Rogue is commonly available to rent from major companies like Enterprise and National. A 2023 Nissan Rogue with about 35,000 miles on its odometer has a fair market value of $27,000 to $29,000, according to Kelly Blue Book. Without rental car insurance or an existing personal car insurance policy, you're on the hook for that entire cost of repairs yourself.

"In short, opt for the rental agency products, or at the very least the loss damage waiver, whenever feasible," he says.

How much is rental car insurance?

The cost of rental car insurance varies based on the car rental company, the location you’re renting from (such as the airport versus a suburban locale), the vehicle you rent and the coverage options you select, as well as the duration of your rental and, in some cases, the number of miles you drive

To get an idea of how much a vacation car rental may cost, we requested quotes for a standard mid-size car from seven major car rental company websites at Orlando International Airport, for travel between July 9 and July 16, 2024.

In this example, we found that rental coverage usually starts at about $30 per day for collision damage protection, while policies that include collision, supplemental liability, personal effects and roadside protection start at about $60 per day but can vary.

All rates below are quoted on a per-day basis. The rate you are charged may differ.

How do I buy rental car insurance?

You can buy rental car insurance online when you make your reservation or at the counter when you pick up your car. Several companies sell standalone rental car insurance policies, including Allianz Travel, Travel Guard and American Express. Some, like Travel Guard, will cover you whether you’re traveling domestically or overseas; others only apply to travel in the U.S. You can also get rental car insurance from the rental company online or when you’re picking up your vehicle.

Prices and coverage vary from company to company. On its website, Allianz Travel says rates start at just $11 per day for primary collision, loss and damage coverage, while American Express charges a flat rate of $19.95 for the term of your rental for primary damage and theft coverage.

Frequently asked questions

Does rental car insurance cover long-term rentals?

If you plan to rely on your own car insurance when renting a car, bear in mind that most policies will not cover rentals lasting more than 30 days. If you’re renting a car for a longer period of time, you may need to purchase rental car insurance through the company you’re renting from.

Are there any age restrictions for rental car insurance?

There isn't an age restriction for rental car insurance, but rental companies often have a minimum age requirement to rent a vehicle. If you’re younger than 25 years old, some companies may not rent you a vehicle or, if they do, charge you a higher rate.

Does my credit card provide rental car insurance?

Most major credit cards do offer car rental insurance as a perk for account holders. However, in order to be eligible for coverage, you must pay for your car rental in full up front and also decline the rental agency’s collision damage waiver insurance.

Depending on the type of card and the issuer, one of two types of coverage is available:

• Primary coverage means your credit card insurance will apply before your personal car insurance coverage does, potentially saving you from any out-of-pocket expenses like a deductible. If you need to file a claim, you should contact the credit card insurance company.
• Secondary coverage kicks in after your personal insurance does, supplementing any cost overruns your policy won’t cover. This is the more common form of credit card rental car insurance. If you need to make a claim, you should file with your own insurer first.

Each credit card has different rules and regulations regarding what is and is not covered under your cardholder agreement. It’s a good idea to check with your issuer before renting to make sure you have adequate coverage.

What should I do if I have an accident in a rental car?

If you are in an accident, follow the same procedure as if you were in your own vehicle. First, move the vehicle to a safe, off-road location if possible. Next, contact the police and emergency responders if necessary. Exchange license, insurance, and contact information with the other driver or drivers, as well as any possible witnesses, and document the damage with photos or video. And contact the rental agency at your soonest convenience. The rental firm will explain their claims procedure and guide you through the next steps.