Rental Car Insurance: When You Need It & When You Don’t
- Updated: 04/18/2024
- Janice
It is a rare traveler who is not confused about rental car insurance. We all think, or hope, our auto insurance policy covers us. Or believe our credit cards provide the protection we need. Though—and often, we are never entirely sure.
So, to help you make a more informed decision at the rental car counter to decline or accept rental car insurance, learn when you need it, when you do not, and which coverages you should never be without in this article.
Table Of Contents
Important note to international readers: this article is written specifically for a U.S. audience. Whether you need to buy rental car insurance depends on your country-specific insurance policies and where you plan to travel.
However, if you plan to visit and rent a vehicle in the U.S., due to the high cost of out-of-pocket American medical care, I recommend—at a minimum, buying supplemental insurance. Whether you choose travel insurance or rental car insurance, either will likely, depending on the policy, help cover your medical costs related to an accident. Learn more about the different rental car insurance coverages, including personal accident coverage, which includes medical care, here.
When You Do Not Need Rental Car Insurance
There are three main scenarios when you do not need to buy rental car insurance.
1. You already have a full coverage* auto insurance policy for a car you own or lease.
And this is key—you are driving the rental car for personal reasons (not business) and only in the U.S. or Canada, for generally, 30 days or less. Under these scenarios, and in most cases, your existing auto insurance policy will extend your coverage to your rental car. Most top insurers (e.g., Allstate, State Farm, USAA, etc.) offer this. Though, contact your auto insurer before your trip to verify that your existing policy applies to the particulars of your planned rental.
*Your auto insurance policy should include liability, comprehensive, collision, and personal injury protection/medical payment coverages. If you do not have these coverages or set their limits low, you may need or want to purchase additional rental car insurance.
2. You purchased a travel insurance policy that includes rental car insurance.
Search for travel insurance policies that offer rental car insurance on online travel insurance marketplaces like InsureMyTrip.com.
Learn more about why InsureMyTrip.com is my #1 resource for shopping and comparing travel insurance policies in this complete overview.
3. You have a credit card that offers a complimentary collision damage waiver (CDW) on rental cars.
And you pay for the rental with that credit card—and decline CDW or LDW (loss damage waiver) coverage at the rental car counter. Though it is good to know that CDW coverage is not complete insurance. Instead, as its name indicates, it is a “waiver,” which means your rental car company cannot come after you for the cost of repair or replacement of your vehicle in the event of an accident or damage.
However, if another vehicle or property is involved in an accident, or you or others are injured, you could still be on the hook to pay out of pocket. Your CDW coverage will not provide protection for these other costs which could run into the tens of thousands of dollars.
Because of this, and if you do not have other personal insurance policies (e.g., auto, property, health, umbrella liability, etc.) that provide protection for these other costs, or their coverages are limited or set low, you may need to purchase additional rental car insurance coverages along with your CDW. Learn more about each kind of rental car coverage and whether you need them, here.
Rental car insurance is an umbrella term for several individual coverages and protections. Do not hit snooze yet! Understanding the difference between the categories of coverage, which I detail here, will save you time and money and ideally help you avoid costly mistakes down the road.
When You Need Rental Car Insurance
There are several scenarios when you may need to purchase full or partial rental car insurance coverage(s). I share the most common ones below.
You do not have a personal auto insurance policy.
Or you have a limited policy that does not extend coverage to rental cars. Plus, you did not purchase a travel insurance policy with rental car insurance.
You plan to travel internationally.
Your U.S. auto insurance policy will not provide coverage outside the U.S., except, possibly in Canada. Check with your auto insurance provider to confirm where you have coverage.
For travel in Canada, know that liability coverage minimums are much higher than in the U.S., typically at 200,000 CAD (equivalent to ~150,000 USD) or more. Because of this, if you have an auto insurance policy that extends coverage to rental cars in Canada, you may still have to buy supplemental liability coverage to bridge the gap between your policy and the Canadian minimum. Plus—to accommodate Canadian law, you must carry proof of liability coverage.
You have an auto insurance policy with a high deductible.
The deductible is the amount you pay out of pocket before your insurance coverage kicks in to pay for repair, replacement, or care. And you prefer to pay for a rental car policy with a lower deductible.
You have auto insurance, but you do not want to risk adding a claim.
Especially if you are already a riskier driver with a higher premium, which could further increase your rates.
You have auto insurance, but you carry the minimum liability coverage for your state.
For example, NJ and AZ only require $15,000 bodily injury liability per person. So, if you live in a low-liability state and set low limits, you may want to purchase more coverage to ensure better protection.
You have auto insurance, but due to the low value of your vehicle, you do not carry comprehensive or collision coverage.
Assuming the rental car you will be driving has a higher value than your personal vehicle, you will need to purchase collision damage waiver (CDW) or loss damage waiver (LDW) rental coverage, to protect you from paying out of pocket for the replacement and repair cost of your rental if involved in an accident. Learn more about these coverages here.
You plan to drive a specialty vehicle excluded from your regular auto insurance policy.
For example, if you plan to drive a luxury car, pickup truck, RV, cargo van, or passenger van, your personal auto insurance policy may not extend coverage to your rental. Contact your auto insurer to learn which vehicle types it excludes.
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You are traveling on a business trip.
Most personal auto insurance policies will not cover business rentals.
You are traveling for longer than 15 or 30 days.
Generally, credit cards will provide CDW protection for up to 15 to 30 days, depending on the card, and personal auto insurance policies for up to 30. Double-check trip length caps with your insurance providers before you go.
Why Having the Right Coverage for Your Rental Car Matters
Rental car insurance works like insurance on your home, rental property, or for your health.
It provides financial protection against unexpected or ruinous worst-case scenarios.
Without the right insurance coverage on your rental car, in the event of an incident, you could be responsible for paying out-of-pocket for any repair or replacement related to your rental vehicle, other vehicle(s), or property involved.
It protects you against the cost of unexpected medical care for anyone involved in an accident.
If you are deemed even partially responsible for an accident, your financial responsibility could extend to medical treatment related to the accident, including ongoing care, for yourself or others. So, unless you are independently wealthy, with ready funds to pay for a new car you do not keep, or for five-figure, or more, medical bills, then it is an excellent idea to have the correct rental car coverage. That way, one missed turn or distracted moment does not translate into a draining of your savings or years of debt.
The likelihood of an accident while driving a rental car is greater.
You will be driving a new vehicle in an unfamiliar place. While you struggle to navigate traffic, circle roundabouts, and search for street signs, the likelihood of an accident will be higher than ever.
What Makes Up Rental Car Insurance: 4 Main Types of Coverage & Protections
Rental car insurance is an umbrella term that includes four main types of coverage and protections. In some cases, you will need to buy them all. In other situations, you only need to buy one or two. Since the average cost of complete rental car insurance, including all coverages, can vary from $31 to $60 per day (1), learning the difference between types of coverage can help you save by knowing which protections you need and which you can skip.
The four main rental car insurance coverages are:
Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)
The collision damage waiver (CDW) covers damage done to your rental vehicle in the event of a crash, vandalism, or natural disaster.
The loss damage waiver (LDW) combines CDW (crash coverage) with theft protection.
Know that rental car companies and credit card companies often use these two terms interchangeably. So, when you see either term, clarify what it covers. CDW/LDW coverages arenot complete insurance. Instead, they are waivers that relieve you of all financial responsibility if your rental car is damaged or stolen.
However, you could still be on the hook to pay for other costs if another vehicle or property is involved in an accident or you or others were injured, as your CDW coverage will not provide protection for these other costs. Learn about other coverages you may need in the sections below.
Another important thing to know is that, unlike your personal auto insurance policy, CDW/LDW coverage may not protect you if you drive recklessly—like speeding, drinking, driving off-road, or venturing on gravel roads. This means your rental car company could require you to pay out of pocket for any damages or accident-related expenses. Check with your rental car insurance to understand the terms of your coverage.
Average cost for CDW/LDW coverage = $10 – 30/day (2), depending on the type of car, location, and taxes and fees
Auto insurance equivalent for CDW/LDW coverage: Comprehensive and collision coverage
What are comprehensive and collision coverages? They are coverages typically included in your personal auto insurance policy.
Comprehensive coverage pays for repair or replacement in non-collision events such as theft, vandalism, glass breakage, animal accidents (e.g., hitting a deer), and acts of nature (e.g., hailstorms).
Collision coverage—as the name indicates, covers your vehicle replacement or repair in a collision event.
Policyholders often skip paying for comprehensive and collision coverage for low-value vehicles (e.g., worth a few thousand dollars). If you have an auto insurance policy but do not carry comprehensive or collision coverage, you will want to purchase supplemental CDW/ LDW coverage. Or pay with a credit card that provides it. Otherwise, in the event of an incident, you could be on the financial hook for repairs—anywhere from a few hundred to several thousand dollars—or the entire replacement cost of the vehicle. Ouch.
(Additional) Liability Coverage
Liability coverage protects you if you injure a person or damage their property, including their vehicle, while driving. If you have sufficient liability coverage through your auto insurance or an umbrella liability policy, you can skip buying additional liability coverage.
Rental car companies refer to this coverage as “additional” liability because the law in most U.S. states requires them to include the minimum liability coverage in the rental cost. Though because some US states, such as AZ and NJ, have unusually low liability minimums ($15,000), you may want to purchase additional coverage for extra protection. $15,000 does not cover much for vehicle replacement or hospital bills. You will be on the hook to pay anything above it.
Average cost for (additional) liability coverage = $7-15/day (3), depending on location, taxes and fees
Auto insurance equivalent for (additional) liability coverage: Bodily injury and property damage liability
Personal Accident Coverage
Personal accident coverage helps pay for your and your passengers’ medical bills in the event of an accident. As the cost of medical care in the U.S. without insurance is high—as to being financially ruinous—it is an excellent idea to ensure you have the right coverages already in place or purchase supplemental protection before renting a car. If you have auto insurance that includes personal injury protection or have a U.S. health insurance policy, depending on their limits, you likely do not need to buy this coverage, as it will duplicate what you already have.
However, if your coverage limits are set very low, or you are traveling with a group where others do not have similar protections, you may want to purchase this coverage.
International travelers visiting the U.S. who already hold travel insurance policies that include medical coverage, depending on the policy, likely do not need to purchase this additional protection. Know that rental car companies often bundle the cost of personal accident coverage with personal effects coverage, detailed below.
Average cost for bundled personal accident and personal effects coverage = $5-11/day (4), depending on location, taxes, and fees.
Auto insurance equivalent for personal accident coverage: Personal injury protection
Personal Effects Coverage
Personal Effects Coverage protects your personal belongings, like a laptop, clothing, expensive travel gear, or other personal items, damaged in an accident or stolen from your vehicle. For travelers with homeowners or renters’ insurance, your policy likely already protects these items in what is known as “off-premises coverage,” and there is no need to purchase double coverage.
Average cost for bundled personal accident and personal effects coverage = $5-11/day (4), depending on location, taxes, and fees.
Personal insurance equivalent for personal effects coverage: Homeowners and renters’ personal property coverage
Data points from:
(1) – Marketwatch.com
(2) – Wallethub.com
(3) – Consumeraffairs.com
(4) – Autoslash.com
Can You Rent a Car Without Rental Car Insurance?
In the U.S., technically, yes—but it is not advisable. Car rental companies already insure their vehicles. And—in most U.S. states—they are required by law to include the minimum bodily liability insurance for the state they rent from in the cost of their rental. Additionally, they do not require you to show proof that you have insurance.
However, riding without rental car insurance is a huge financial gamble. If you are involved in an accident with your rental car or your vehicle is vandalized, stolen, or damaged by natural causes, or you cause injury to another party—without insurance, you could easily be on the hook for paying tens of thousands, if not hundreds of thousands of dollars, in repair, replacement or medical expenses.
So, do yourself the favor of bumping up your trip budget and paying the extra money each day for rental car insurance—if you need it.
For a seven-day trip—the price tag for full rental car insurance, including all coverages, runs less than $500. This dollar amount is a lot less than a lifetime of debt.
5 Things to Know or Do Before You Buy Rental Car Insurance
Consider these five items your checklist of things to know or do before you rent a car.
1. Get familiar with your insurance policies.
Check with your auto or property (homeowners or renters) insurance providers to see what coverages you already have and how they apply to rental cars. Understand trip length limits and vehicle type exclusions. Most insurance companies provide detailed FAQ pages or articles explaining rental car insurance coverage. Doing this will help you avoid paying for duplicate coverage.
2. Check with your credit card company.
Many travel-friendly credit cards offer partial rental car insurance in the form of collision damage waiver (CDW) coverage as a benefit to cardholders. This coverage, which often includes international rentals, is typically activated when the cardholder pays for the auto rental with the card and declines CDW/LDW coverage from the rental car company.
A good thing to know is that this benefit typically includes only the CDW, meaning you may have to buy the other coverages, like (additional) liability, personal accident, and personal effects, if you are not already protected by your personal auto, umbrella, or property insurance policies.
Additionally, know the specifics of your credit card rental car coverage. Some cards offer a CDW as secondary coverage, meaning it will only kick in after your personal auto insurance policy has been exhausted. Others may offer it as primary coverage, meaning it will be the first line of defense in the event of an accident.
Also, realize that this coverage may only cover a period of no greater than 15 days. If you plan to travel longer than this, you may need to purchase alternate insurance. So, take time to understand the terms and conditions of your credit card’s rental car insurance before declining any coverage from the rental car company.
3. Research rental requirements and recommendations specific to your destination.
Did you know that in Iceland, both locals and rental car companies recommend—though the law does not require it—buying extra gravel protection to insure your vehicle against damage from flying rocks? Although many roads are paved in Iceland, plenty are not, even including sections of major highways, making the risk of rock damage highly probable.
Or did you know that most provinces in Canada require drivers to carry liability insurance minimums of up to 200,000 CAD (150,000 USD) or more and that you must show proof of it? These country-specific car rental insurance recommendations and requirements are good things to discover before you go. Search for them using terms like “renting a car in [country]” or “rental car requirements in [country]” on search engines like Google.
4. Evaluate your rental car company insurance options before your trip.
Some rental car companies may provide a basic level of coverage included in the rental price, while others may offer additional coverage options for an extra fee. Read the fine print and understand what is covered and what is not. Most rental car companies will have an informational webpage that details coverage options, like this one on the Avis website. Google search “[rental company name] coverage options” to find it.
5. Plan to drive safely and follow local rules of the road.
Unlike your personal auto insurance policy, your rental car insurance policy may not protect you if you drive recklessly—like speeding, drinking, driving off-road, or even venturing onto gravel roads. These exclusions mean that in the event of damage, accident, or injury, you could be on the hook to shoulder the whole bill of repair, replacement, or medical care if you have been engaging in reckless driving behavior. Check with your rental car insurance to understand the terms of your coverage.
Make an Informed Decision Based on Your Needs
After reading the sections above, you may have realized that there is no one-size-fits-all answer to the question of “Do I need rental car insurance?”
Whether or not you buy it ultimately depends on your personal needs, pre-existing insurance policies, where you plan to travel, risk tolerance, and budget. If you already have comprehensive auto insurance, property insurance, or rental car coverage from your credit card, you may not need to purchase it.
However, if you do not have adequate coverage or plan to travel internationally, you may need to accept the extra cost and buy it. No one wants to think about or plan for worst-case scenarios, particularly when heading out on vacation, but they can happen, and when they do, you will not only want to be prepared—but fully protected too.
Related Reading
For travelers hitting the road, check out my related articles below that will help smooth your travel and get out the door with less hassle.
- Travel Insurance Simplified: 4 Reasons You Need It & 18 Things To Know Before Buying It
- From An Expert: InsureMyTrip.com Is My #1 Pick For Trip Insurance
- AutoSlash: Why You Will Love It for Rental Cars
- 15 Tips on How to Raise the Bar on Rental Cars
- Enjoy the Ride: 12 Tips for Better Family Road Trips
- 49 Things You Need to Do to Plan Your Best Trip (Free Travel Research & Planning Checklist)
- Pack Faster & Better With This Universal Printable Packing List
- 25 Expert Packing Tips to Help You Travel Better
- Pre-Trip: A Practical Checklist to Close the House & Pack
Additional Trip Planning Resources
To further help you with travel planning, I share my go-to resources for every trip below.
Google Flights. My first research stop for affordable flights for every trip. Learn why here.
Google Hotels. Use its “Where to stay” button to discover the best neighborhoods to base your visit.
Booking.com. For hotel and rental bookings, I appreciate its flexible cancellation, candid user reviews, discounts, loyalty program, and easy-to-use interface.
Viator, Get Your Guide, & Airbnb Experiences. Quickly find and book highly-rated tours and activities on these sites.
Google Travel Things to Do & Google Maps. Find more things to do in your destination on Google Travel, then record where you want to visit on a custom Google Maps list.
AllTrails. Love to hike? Me too. I religiously use AllTrails to discover hiking and biking trails and download its offline maps to manage my hikes.
Guide Along. 5-star self-guided audio tours that are GPS-compatible for US road trips and national parks. We loved the Glacier National Park tour.
Insure My Trip. I never travel internationally without trip insurance. Learn why here. My preferred place to shop and compare policies is InsureMyTrip.com.
Plus, check out the 15 travel apps I use on trips, my preferred guidebooks, and my free customizable travel itinerary template, downloadable in four file formats.
About the author: Janice Moskoff is a travel writer and blogger who loves hiking, exploring the world, and reading. She writes to inspire travel-loving families, adult friends, and couples on her blog, Gather and Go Travel. Check out her bio, learn how she became a blogger, and discover how to work with her. Sign up for her monthly Discovery Newsletter to get her latest travel recommendations and how-to’s.
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Affiliate Disclosure: Some of the links on this page may be affiliate links, and at no additional cost to you, I earn a commission if you make a purchase. I only recommend products and companies I use. And the income goes to keeping the site community-supported and ads minimal.
Welcome to Gather and Go Travel, a blog inspiring families, adult friends, and couples to explore US and international destinations and to get outdoors. I am Janice, an experienced traveler to over 50 countries and a travel writer, book lover, and blogger. Learn more about me, read our story, and how to work with me.
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