Renting a car can be nerve-wracking at times. After all, you are driving an unfamiliar car, and usually doing so in an unfamiliar place. When renting a car, you may be confused at all of the extra insurances they offer you, and whether or not you should pay for them. In order to make the best decision, you should understand the coverage you already have, and what it is they are offering you.
Your Own Insurance Policy and Rental Cars
You may already have coverage under your own insurance policy. Check your policy or call your insurance agent; they can quickly tell you if you have insurance to cover rental cars. You are legally required to have liability insurance, which means you are protected against damages you might cause to other cars and drivers. Your insurance may also cover the damage to the rental car. However, keep in mind that if you are renting a car significantly different from the one on which you are insured, you may run into trouble with your insurance provider. Likewise, if you rent a car that is worth significantly more than the car you currently drive, you will have a hard time extending your current policy to cover the more expensive vehicle. If your insurance covers rental cars, and the car is similar or lower in value to your own, you probably do not need to purchase the insurance from the rental company.
Rental Car Insurance and Credit Cards
Many credit card companies offer insurance on rental cars, provided you pay for the rental car on your card. Check with your credit provider to see if they offer the insurance, and what type of insurance it is. Combining this insurance with any that your car insurance provides may give you as much coverage as you want. Remember that using your credit card to pay for the rental car will lower your limit, which may be a problem if you plan on paying for the vacation with the credit card. Many rental companies will charge a deposit to your card; while the charge won't be processed unless you damage the car, the amount will be reflected in your limit until the car is returned.
Insurance against Injury and Personal Effects
Rental car agencies may also offer insurance against injury to yourself and your passengers. However, if you have comprehensive health insurance, this is usually an unnecessary charge. If, on the other hand, you don't have health insurance, or you have a high deductible, you may want to go ahead and pay the few extra dollars a day to be insured through the rental agency.
Most agencies also offer insurance against damage to your luggage and personal property. It is up to you whether or not to purchase this; you may already be covered under a homeowner's insurance policy.
Collision Damage Waivers
Rental car agencies in many states also offer a Collision Damage Waiver, or CDW. This is not insurance, but acts in a similar way. For a few dollars every day that you have the car, the rental agency agrees not to charge you for any damage done to the car. This includes everything from minor dents to the car being totaled. Although this seems similar to what is covered under your own insurance, there is one important difference. Even if your insurance covers collisions, the rental agency can (and will) charge you for every day that the car is out of use due to repairs. Because they can't make money on the car anymore, they will charge you for it. If you purchase CDW, the rental agency will not charge you this daily amount. However, make sure to read the fine print because a number of things will disqualify you from your CDW agreement. All together, a CDW is probably an economically sound investment.
In the end, purchase the amount of insurance for your rental car that makes you the most comfortable. Understand what is and is not already covered by your own insurance, but do not be afraid to pay a few extra dollars a day for peace of mind. After all, if you are using a rental car because yours is not working or you are on vacation, the last thing you need is added stress and worry.