Rental Car Accidents and Insurance Coverage

Reviewed by David Goguen, J.D., University of San Francisco School of Law
If you need a replacement vehicle after a car accident, renting a car can be daunting. Let's take the mystery out of the process, especially when it comes to insurance on the rental.

You’ve been in a car accident and you're going to be left without a vehicle for a few days, weeks, even months. You're probably wondering whether your car insurance policy provides coverage for a rental vehicle, and if so, whether you need to purchase additional insurance coverage for the period of the rental. In this article, we'll answer these questions, plus a few more.

Will My Car Insurance Company Pay for a Rental?

In most instances, yes, your car insurance company will usually pay a certain daily amount for a rental car while your vehicle is out of commission. But be aware that if you drive a minivan, luxury vehicle, or large truck, you probably will not be able to rent a similar-sized car for the amount your car insurance company will pay. Your car insurance company won’t pay for a rental car forever either, so make sure you understand the exact terms of your policy so that you don’t get stuck footing the bill if vehicle repairs take a long time.

More Auto Insurance FAQ.

Do I Need to Buy Rental Car Insurance?

So now you’re stuck renting a car, and the agent at the desk asks you, in a deeply concerned voice, "Do you want to purchase insurance for the rental?"

Before you say yes and spend $15 to $40 more a day for your rental car, make sure you understand what insurance coverage you may already have.

Check your own car insurance policy.

Look at the fine print of your own car insurance policy, or call your insurance company, and verify whether your policy covers a rental vehicle -- it usually will, as long as you are not using the car for business purposes. If you already have liability, comprehensive and collision coverage under your policy, you probably do not need to buy more from the rental agency. (Learn more about different types of car insurance coverage.)

Be aware that if an accident does happen, you will still be responsible for any deductible required under your policy, and your insurance rates may increase if you make a claim.

Check your credit card.

Your credit card may offer rental car insurance, but don’t just assume that it does. Make sure you call your credit card company and get the details.

Most credit cards will only pay for damages in excess of your own automobile insurance policy. And your credit card company almost certainly has spelled out rules that must be followed in order for their insurance to apply. Some high-end credit cards offer excellent rental car insurance, while other credit cards offer only minimal protection. In almost all cases, to make sure you get insurance, you must charge your entire car rental on your credit card and decline the supplemental collision damage offered by the rental car company.

Many credit cards exclude rental coverage for pick-up trucks, off-road vehicles and luxury vehicles. Some companies do not cover tire and rim damage.

What if I Don’t Have Car Insurance or Credit Card Coverage?

If you do not have your own auto insurance, and your credit card doesn’t offer coverage (or their coverage is too minimal), you have several options.

Buying Insurance at the Rental Car Counter

Commercial rental car companies generally offer the following types of coverage for purchase at the time of rental. Be aware that insurance is different from state to state, so coverage and cost will vary.

Loss damage waiver or a collision damage waiver is not really insurance at all. This waiver simply frees you of financial responsibility if the rental car is damaged or stolen. In some cases it may also waive charges for the company's loss of use of the vehicle, and it may also cover towing. However, this waiver can be voided by the rental company if you damage the vehicle while driving on unpaved roads or while operating the car illegally (while driving under the influence, for example).

Liability coverage for damage you do to someone else's vehicle, or for injuries you may cause while driving the rental car, are usually required under state law. Rental car companies must provide the state required minimum amount of liability insurance. However, this is often not very much, typically $15,000 to $25,000 per injured person, and around twice that per accident. If you do not have your own car insurance, you may want to purchase supplemental liability insurance, which would cover more than the minimal amount provided by the rental car company under the law.

Personal accident insurance covers the medical bills of the driver and passengers, after injuries suffered in a crash with the rental car. If you have good health insurance, you probably don't need this coverage.

Personal effects coverage provides protection for theft of items from the rental car.

Buying Rental Car Insurance on Your Own

If you rent vehicles often and do not have your own automobile insurance, you may want to consider contacting a company that sells standalone rental car insurance. Of course, you need to understand what this kind of policy does and doesn’t cover, and you usually have to decline the rental company’s insurance in order for the standalone policy to take effect.

Learn more about rental car accidents.

What About Coverage for Car Sharing?

Nowadays, there's an app for everything, including renting a personal vehicle from someone else, or sharing vehicles with others. Before you sign up for one of these services make sure you know what the rental/sharing agreement covers, and what supplemental insurance you may need. Always ask the important questions up front, so that there are no surprises if something goes wrong.

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