What is The Best Way to Insure a Rental Car?

Renting a car can be a convenient travel solution, offering easy transportation wherever you need to go. Yet, using a rental car requires some knowledge about insurance to understand the best way to insure your car and save you from unnecessary expenses and stress. Let’s explore whether your existing car insurance policy covers rental cars, how credit card rental insurance works, and when it’s best to purchase additional rental car insurance!

Does my car insurance policy cover rental cars?

The first place to check for coverage is your own car insurance policy. Car insurance policies typically offer optional coverage for rental cars, meaning you might not need additional rental car insurance. However, it’s crucial to verify the following specifics of your policy.

Liability Coverage.

Liability coverage always follows a vehicle owner in Canada. So, your rental company’s liability insurance would be primary in the event of a claim. So, your main goal is to ensure you have adequate physical and collision damage coverage on the rental vehicle.

Collision and Comprehensive Coverage.

Collision coverage pays for damage to the rental car from a collision, while comprehensive coverage handles non-collision-related damage, such as theft or natural disasters. Again, to extend this coverage to rental cars is an option that needs to be added to your car insurance policy. This is only available if you have collision and comprehensive insurance on your own vehicle. Check out our blog on Demystifying Collision Insurance to learn more.

Deductibles and Limits.

If you rely on your personal auto insurance for a rental car, the same deductibles and coverage limits will apply. This could lead to paying out-of-pocket costs if an accident occurs. It’s wise to assess whether your deductibles and coverage limits are appropriate for a rental car situation. Check out our blog on High or Low Car Insurance Deductibles to learn more.

How does credit card rental insurance work?

Another potential source of rental car insurance is your credit card. Many credit cards offer rental car insurance included as a perk, but the extent and type of coverage can vary significantly.

Primary vs. Secondary Coverage.

Credit card rental insurance typically falls into two categories: primary and secondary coverage. Primary coverage means the credit card’s insurance pays first in the event of a claim, allowing you to avoid involving your personal auto insurance. Secondary coverage, on the other hand, kicks in only after your personal auto insurance limits are exhausted.

Activation Requirements.

To activate your credit card’s rental insurance, you typically need to pay for the rental car with that card and decline the rental company’s collision damage waiver (CDW) or loss damage waiver (LDW). Check your credit card’s policy details before relying on it for coverage.

When should you purchase the rental company car insurance?

With all this in mind, there are still some situations where purchasing rental car insurance separately makes the most sense. For more details on all things car insurance, give our blog Debunking Common Car Insurance Myths a read! Here are a few scenarios to consider:

High Deductibles.

If your personal auto insurance policy has high deductibles, the rental company’s insurance can help you avoid significant out-of-pocket expenses in case of an accident. This can be particularly beneficial if you’re renting a car for an extended period or in a location unfamiliar with driving conditions.

Business Travel.

If you’re renting a car for business purposes, your personal auto insurance may not apply. In such cases, purchasing the rental company’s insurance ensures you’re protected while on the job. Additionally, some business credit cards offer rental insurance specifically for business trips, so check your card’s benefits.

International Travel.

When renting a car abroad, your personal auto insurance policy is unlikely to provide coverage. Even your credit card rental insurance may have limitations or exclusions for international rentals. It’s wise to purchase the rental company’s insurance in these cases to avoid potential coverage gaps and complications.

Insuring a rental car involves understanding your coverage from a few angles—your personal auto insurance, credit card benefits, and the rental company’s offerings. By evaluating these options and considering the specifics of your travel situation, you can make an informed decision that protects you and provides peace of mind. Safe travels!