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How to Rent a Car When You Don't Have Insurance

Jim TrummSep 25, 2017

Automobile insurance provides financial protection to drivers, vehicle owners, passengers and other people on the road. It covers theft and damage to vehicles and other property, medical expenses resulting from accidents, liability arising from the use of a motor vehicle, and the risk of being in an accident with someone who is uninsured or underinsured. It's generally purchased by people who own a car or truck. 

How Does Rental Car Insurance Work?

Rental car companies offer to sell their customers insurance that's substantially similar to the coverages that car owners have. When you rent a car, it’s a very good idea to have some form of insurance for it, even though it isn’t yours and even though rental car insurance isn’t required by law. This protects you against the painful consequences of having your rental stolen or damaged in an accident, as well as against the ruinous consequences of an accident that involves personal injuries.

The good news is that if you already own and insure a vehicle, your general liability and comprehensive coverages will usually apply in a rental car. So will medical payments and personal injury protection coverages, in most cases.

It’s important to understand, though, that your car’s coverage limits will follow you in your rented car. This might affect your decision whether to buy additional insurance from the car rental agency. For example, if you have comprehensive coverage on a 1997 Toyota Corolla but you’re in an accident that totals your rented 2017 Escalade, you may find that your insurer will pay only the Corolla’s replacement value, leaving you to foot the bill for the difference.

Some credit cards automatically provide collision damage, theft protection, and other coverages when that card is used to rent a vehicle. Other credit card companies offer plans at extra cost that will provide liability and medical payments coverage. It’s worth noting that if your rental car is broken into and personal property is stolen from the vehicle, the theft may be covered by your homeowners insurance.

But if you don’t have any other source of motor vehicle insurance – or don’t have enough of it – then it’s advisable to purchase insurance on the vehicle through the car rental company. And this is where things get tricky.

What Are the Different Types of Rental Car Insurance?

The first type of insurance coverage that rent-a-car companies offer isn’t really insurance at all. It’s called a collision damage waiver or a loss damage waiver. It’s actually an agreement by the rental company to waive its rights to make you pay for damage to their car. Such agreements frequently do not apply if you take the vehicle off-road. They do, however, protect you against another kind of liability you might otherwise incur, namely, a claim by the insurance company against you for loss of income during the time the car is unavailable for rental to another customer.

The second kind of coverage that may be purchased from a rental car agency is liability coverage. This insurance functions very much like the liability coverage in a personal motor vehicle policy. If you injure someone or damage someone’s property in an auto accident, this insurance covers you for the liability that may arise. And this liability can be substantial. It could include damages for medical bills, loss of wages, pain, suffering, mental anguish, scarring, disfigurement, disability, and loss of consortium.

Another coverage that rental companies sell is personal effects insurance, which compensates you if your possessions are stolen from the rented vehicle.

The fourth coverage option that you may have to decide on at the rental counter is personal accident insurance. This coverage is very much like the medical payments coverage in your own motor vehicle insurance package. It pays for medical bills you and your passengers incur as a result of an accident, regardless of who is at fault.

Different rental companies may offer other coverages as well, but these four are the most common.

How Much Does Rental Car Insurance Typically Cost?

Car rental insurance is generally sold by the day. So while the cost of various coverages may sound like “just a few dollars,” your insurance costs could balloon to “just a few hundred dollars” if you rent a car for a week or two. Collision damage waivers can run about $20 a day. Liability insurance, which is less expensive but more important, goes for between $10 and $15 a day. Personal accident insurance is cheaper still. But if you go for all of the coverage options presented to you by a car rental company, you may be looking at an additional $40 per day or more.

Rental Car Insurance Versus Non-Owner Insurance?

There is another option for people who don’t have their own motor vehicle insurance policy and don’t want to pay for coverage at the rental car counter. This is non-owner car insurance and it’s just what it sounds like – an insurance policy that covers you when you drive a car you don’t own. These policies are available through many – but not all - motor vehicle insurers. They’re a good deal if you rent or borrow cars frequently. Finding these policies can take a bit of research, since even the insurance companies that offer them generally don’t make quotes available online. But they can be a great deal, especially compared against the per-day coverage costs charged by car rental agencies.

What to Watch out For

Auto insurance is confusing, even when you’re insuring your own car. And when you’re standing in line at the rental car counter hoping to get through the paperwork as quickly as possible, it seems even more bewildering. The two biggest things to watch out for at that moment are 1) not having adequate insurance, and 2) buying insurance you don’t need.

Accidents happen, even to good drivers. So resist the temptation to drive uninsured. Just as important is the temptation to save a few dollars and buy bare-bones coverage that really won’t provide the benefits you need. It’s not unusual for a fender-bender to result in $7,000 in automobile damage. It’s not uncommon for a trip to the emergency room to result in a $15,000 bill. And it’s not out of the question for a seemingly-minor personal injury to result in $40,000 in damages. Insure accordingly.

However, when you rent a car, there is also a danger that you will inadvertently duplicate coverage you already have.

For example, your homeowners insurance policy may cover the theft of personal property from your rental car, so in that case, why buy personal effects coverage? Your own auto insurance may cover you for liability, so if what you already have is sufficient, don’t duplicate it and purchase a rental car’s liability package. If you have collision and comprehensive coverages on your own car or truck, you may not need the collision damage waiver. Vehicle owners who already carry medical payments or personal injury protection insurance may not need to buy a rental company’s medical payments insurance.

Further, if you rent a car by using a credit card that provides car rental insurance coverage, you can generally safely decline to buy the coverage packages offered at the rent-a-car check-in counter.

In short, as with all purchases, the biggest risk is being uninformed. Check out your credit card agreement to see what coverages it provides. Review your homeowners policy to see if it will apply if your personal property is stolen from a rental car. And talk to one of the insurers listed in our top ten auto insurance companies about what kinds of coverages will follow you when you rent a car.