Rental Car Insurance: Do You Need It?

You don’t need car insurance to rent a car. Rental car companies must carry auto coverage on their vehicles per state law. However, you can decline to purchase additional coverage at the rental counter and still legally drive your rental car off the lot. 

Rental car insurance includes additional car insurance you can select to cover your rental car. In contrast to primary car insurance policies, rental car insurance applies only during the rental period. While there is no standard rental car insurance policy, most, if not all, rental car companies offer several types of car insurance coverage. However, you are not required to purchase any rental car insurance to drive in any state legally. 

Types of rental car insurance

Insurance policies sold by car rental companies typically don’t cover uninsured drivers. Rental car companies will prompt you to choose between several types of rental car insurance, including the following: 

• Collision Damage Waiver (CDW): Otherwise known as a Loss Damage Waiver, this type of insurance covers damage to the rental vehicle, including dents, dings, and scratches. Many CDWs also cover loss of use fees, which reimburse a rental car company for business lost due to your rental car being out of commission. 
• Supplemental Liability Protection (SLP): Similar to upping your coverage limits on your personal car insurance policy, SLP increases coverage for any bodily injuries or property damage you incur due to an accident. 
• Personal Accident Insurance (PAI): This insurance coverage picks up where SLP drops off by covering your and your passenger’s medical bills in an accident. Many travelers choose to add this type of car insurance if they have limited health insurance coverage. 
• Personal Effects Coverage (PEC): If you travel with expensive equipment, electing PEC reimburses you for any personal items stolen or damaged while in a rental car.  

Note that roadside assistance typically doesn’t come with most rental car agreements. In fact, you may have to purchase roadside assistance as additional coverage. Check the fine print if you have roadside assistance in your personal car insurance policy. Most policies don’t extend roadside assistance to rental cars, so you’re better off purchasing this type of coverage through a third-party agency such as AAA. 

How much does rental car insurance cost?

Most rental car insurance comes with no deductible but averages between $30 and $60 daily on top of your base rental rate. The total daily cost of rental car insurance consists of: 

• CDW: $20 to $30 
• SLP: $8 to $12 
• PAI and PEC: $2 to $3
  
  

Final costs will depend on which rental company you choose, which coverage you elect, and which car you rent. Luxury cars tend to have higher rental car insurance costs to reflect their increased value over an economy or compact car. 

You have several coverage options if you want insurance but don’t want to purchase car insurance directly from the rental agency. You can buy non-owner car insurance as a separate policy. This type of car insurance acts as a liability insurance policy, even if you don’t own a car. If you rent frequently, non-owner car insurance is a no-brainer.  

Most people purchase rental car insurance from the same company they’re renting a car with for convenience. Similarly, even though there might be a penalty for dropping a rental car off at a different location, you might be willing to pay for the additional cost if it fits into your itinerary. However, taking a larger view to consider your options can help you save money and time. 

Seeking a rental car alternative like FINN helps you avoid the hassle of finding a rental car insurance option altogether. With a FINN subscription, insurance comes as part of your monthly subscription fee, so you don’t have to worry about comparing rates, inputting personal information, or maximizing discounts. Instead, you can drive your new subscription vehicle for up to a year and swap it out for a new car when your terms end. 

Yes, you can buy rental car insurance through a rental car company directly. Enterprise, Hertz, Avis, and their subsidiaries offer rental car insurance every time you rent a car. In addition, you can also obtain rental car insurance from the following sources: 

• Third-party insurance company: Insurance companies such as Sure, Rental Cover, Bonzah, and Allianz Global Assistance offer rental car insurance that’s often a fraction of the price of insurance you purchase through a rental car company. 
• Credit card: Though you may pay for your car rental with a debit card, you can obtain rental car insurance through your credit card company if offered. However, you must use your credit card to pay for the rental, and coverage limits may apply. 
• Personal umbrella insurance: As the term “umbrella” suggests, this policy covers any personal liability that arises, including those incurred due to a rental car accident.

While personal auto insurance policies may include clauses extending coverage to rental cars, car insurance carriers typically don’t offer this type of coverage as a standalone product.  

Should your personal car insurance policy include rental cars, restrictions often apply. For instance, the coverage may only extend to a rental car that mirrors the size or class of your personal covered vehicle. This clause voids any coverage for vehicles other than a car rented for personal use, including moving trucks, scooters, ATVs, and motorcycles. 

In addition, any car rented for business does not qualify for coverage under your personal car insurance policy. Some policies may not cover loss of use fees even if they provide rental car coverage. Specifics will vary among auto insurance carriers and individual policies. 

Rental car insurance vs. rental car reimbursement

Insurance and reimbursement for a rental car cover two unique scenarios. If you filed an insurance claim and your car is in the shop, your policy may cover a rental car to keep you on the road. This type of coverage is called rental car reimbursement and only applies when the rental occurs due to a covered incident.

In contrast, rental car insurance is a type of insurance you purchase when renting a car. Rental car insurance and rental car reimbursement are not mandatory coverages but can be handy to have. Reimbursement for a rental car often comes as part of your auto insurance policy, but it’s up to you to select the particular car insurance provider and policy you want. 

Your credit card issuer can cover rental cars if the terms and conditions include coverage. Credit cards that cover rental cars are often defined as primary or secondary coverage. Primary coverage means they’re first in line to cover any damage to the rental car. However, most credit cards that offer rental car insurance are secondary to your personal car insurance policy and any coverage you purchased from the rental car agency.

Unlike the decision to return a rental car or not, debating over rental car insurance can take some thought. You can go to jail for not returning a rental car, but you’re not violating the law if you don’t buy rental car insurance. In fact, if any of the following apply, you may not need rental car insurance at all: 

• Your primary car insurance policy includes personal injury protection (PIP) and MedPay
• You have homeowners insurance or renters insurance to cover your belongings
• You are on a business trip 
• Your deductible is low

However, you may want to look further into rental car insurance if: 

• You have limited personal car insurance coverage 
• You don’t have a comprehensive health insurance plan or personal umbrella insurance 
• You want to maintain your car insurance premiums by avoiding an accident claim 
• You are concerned about gaps in coverage  

Despite the value of rental car insurance, finding a rental car alternative can help you avoid the discussion altogether. FINN offers a fleet of vehicles ready to hit the road for a single budget-friendly monthly payment. You can also select additional monthly mileage if you plan to take a road trip. Rather than worrying about pickup and drop-off times, you can schedule your trips within your subscription period for peace of mind.