How Does Rental Car Insurance Work? A Simple Explanation

Taking out a rental car without a corresponding rental car insurance can result in serious financial debt if you get into an accident. It gets worse if you also have no personal car insurance policy. So, how does rental car insurance work?

I’m not only going to break down how rental car insurance works in baby steps, but I’ll also guide you on the types of rental car insurance and how to buy it.

You’ll need rental car insurance if you’re renting a car and don’t want to touch your personal auto insurance coverages like liability, comprehensive, and collision coverage. A rental car insurance caters to what all these basic car insurance policies cover, such as car repairs, medical costs arising from accidents, and damages to third-party drivers you crash into.

If you do not want to pay a high deductible when renting a car like you would on your personal policy, you can also boycott your insurance company and get rental car insurance from a third-party provider.

Though major credit card providers like Visa and Mastercard automatically add rental car insurance to their cards, the coverage might not be sufficient to compensate for all the damages you’ll suffer if your rental car backs into a fence or collides headlong with another vehicle.

In cases like these, you need to be on the safe side by getting rental car insurance if you plan on using a rental car.

What is rental car insurance?

Rental car insurance is a deductible-free policy that shields you from the financial cost of damages and repairs when renting out a car, so you won’t have to make a claim on your personal insurance policies.

Encoded in rental car insurance are coverage types that limit or completely absolve you of any incurred cost whenever the rental car is damaged or stolen in your possession.

We’re going to take a good look at them now.

Related: How to File Insurance Claim Against Other Driver

Types of rental car insurance

Most of these rental car insurance coverages are similar to your personal auto insurance policies. You’ll notice a semblance between them and liability coverage, Personal Injury Protection (PIP), and renters or homeowners insurance. Let’s go over them.

Personal accident protection

Personal accident protection compensates you for your medical costs and that of any passengers in your rental vehicle. It’s similar to Personal Injury Protection (PIP) coverage.

The cost of medical diagnosis, prescriptions, surgeries, or therapy needed as a result of an accident sustained in your rental vehicle is taken care of by personal accident protection.

Personal effects coverage

Personal items stolen from your rental car are covered by the personal effects coverage. This applies to any personal belongings at all such as pieces of jewelry, electronic gadgets, cameras, and other in-car items. It’s similar to what’s found in homeowners or renters insurance.

Supplemental liability protection

This caters to property damages you do to others while riding a rental car. If you rear-end another vehicle with a rental car or you back into someone’s fence, destroying it in the process, your supplemental liability protection would be deployed to take care of it.

Supplemental liability protection also covers bodily injuries you cause to others. It’s very similar to liability coverage.

Loss-damage waiver

A loss-damage waiver is more of a waiver than a true coverage because it makes sure that the insurance company won’t come after you whenever your rental car gets stolen or damaged.

Instead of making you repair the damaged rental car or replace the stolen rental car, the insurance company would take on the cost themselves, completely absolving you from it.

The only time your insurer won’t cover your damages using the loss-damage waiver is when you violate their policy, like using the rental car for business or driving under the influence of drugs.

What does loss-damage waiver cover?

A loss-damage waiver covers the following:

• Replaces stolen rental cars
• Repairs damaged rental cars
• Losses from vandalism, fire accidents, natural disasters, and fire

How does rental car insurance work?

Rental car insurance works in pretty much the same way as your personal car insurance policies. To get started, locate a rental car insurance provider and request a rental car. Fill out the necessary paperwork and then zoom off with your rental car.

If you get into an accident with the rental car while you’re at fault, then the liability coverage on your personal policy will kick in before your supplementary liability insurance, if you have one.

Most times, you might have to use up the coverage on your personal policy before exhausting your rental car insurance coverage. 

Whenever you cause damage to the rental car, either by crashing into another car or property, your loss-damage waiver will clear the cost of repairs. If you don’t have a loss-damage waiver, you’ll have to pay for the repairs out of pocket. 

Injuries to you and your car passengers at the time of the accident will be catered for by your personal accident protection. 

Before you access your rental car insurance after an accident, you’ll need to write out a vehicle accident report and submit it to your rental car insurance provider.

Lastly, if you hope to use the rental car insurance contained in your credit card after an accident, you’ll have to visit the benefits administrator of your credit card company and submit your accident report. 

You’ll also need to come with your rental estimate and the rental agreement you had with your rental car insurance provider.

The benefits administrator will then check if you have a personal auto insurance policy that can cover the loss needing compensation. If there’s none, then the rental car insurance on your credit card will be approved for use, as it’s most likely to be a secondary insurance.

Your rental car insurance provider has every right to refuse to pay out your coverage whenever you file a claim if you do not adhere to the rental agreement and policies. For example, if you allow a non-authorized third-party driver to cruise around with your rental car and there’s an accident, your insurance claims might be rejected. 

The same applies if you drive under the heavy effects of drugs or you charge people money to use the rental car as a transport vehicle. 

Related: How Do Car Insurance Companies Pay Out Claims?

Can I use a credit card for rental insurance?

Most credit cards come with rental car insurance, especially cards owned by major companies like Visa, American Express, and Mastercard. While it is true that credit cards offer rental car insurance, most of them usually offer it in the form of secondary insurance.

Secondary insurance in this case means that if your rental car gets into an accident or is stolen, your personal car insurance policy will be charged first and you’ll pay your usual deductible. Only after using up your personal car insurance coverage that your credit card will now be billed for the rental car insurance.

Only a few credit cards offer primary insurance. With primary insurance, your credit card will be charged to pay out a claim for damages to your rental car. There would be no need to contact your insurance company and you won’t end up paying a deductible.

To make use of the rental car insurance on your credit card, you’ll need to pay for the rental car with your card while renting it in your name. If you’re not sure your credit card provider offers rental car insurance, you can call them to make inquiries on what type of insurance their card carries. 

How to buy rental car insurance

Rental car insurance can be bought in various ways. Let’s go over the methods of purchasing rental car insurance.

Buy directly from the rental car company

Getting rental car insurance from the rental car company is a very convenient option. Though slightly more expensive than purchasing rental car insurance through a credit card or third-party provider, the ease with which it can be done more than makes up for it.

You can make an online reservation to book your rental car from the comfort of your home, Or you can simply decide to walk up to the counter and get your rental car physically.

After doing that, you’ll be guided on the type of rental car insurance you need, and all the paperwork can be processed physically or digitally through your browsing device.

Get it through a third-party provider

Many third-party providers offer standalone rental car insurance to car owners whose personal car insurance coverage doesn’t cover rental cars. Even better, they offer it at a cheaper price than a rental car provider company.

It’s quite normal to have personal coverage policies from one insurer and rental car insurance from third-party providers. Search for third-party insurance companies offering rental car insurance and compare prices to get cheap and convenient rates.

Get it by using your credit card

Credit card companies usually embed rental car insurance into their cards, so customers can easily make reservations for rental cars using their credit cards.

A few of these credit card companies offer primary insurance through their credit cards, meaning that you can use the credit card to pay out claims if your rental car is stolen or damaged without contacting your car insurance company.

Other credit card companies allow their credit cards to have secondary insurance so that the personal car insurance coverage of customers is used first before the coverage in their credit cards.

Find out from your credit card provider, especially when they’re major providers, if they offer rental car insurance on their credit cards.

Include it in your full coverage policy

Rental car insurance can be added to a full coverage policy containing liability, comprehensive, and collision coverage. In that case, you’ll be directly purchasing the rental car insurance from your personal car insurance company.

There’s no rule that says you can’t add rental car insurance to a full coverage policy. After all, it only makes the full coverage fuller and more robust. 

Also Read: What Is Full Coverage Car Insurance? Find Out Now