Column: Rental car insurance

Jeff Zignego


There are more options for renting a car than ever before.

In the past, you simply selected a vehicle from one of the many brick-and-mortar car rental companies found at airports, train stations or other locations. Today, technology has made possible other alternatives, including peer-to-peer car services, which enable consumers to rent personally owned cars from others; and car sharing programs in which — for a monthly or annual fee — consumers can pick up a vehicle at a wide range of locations for periods ranging from minutes to days.

While these car rental options mean more choice for consumers, they also mean more questions about insurance coverage. Fortunately, it’s possible to be properly insured when renting a car without wasting money by purchasing duplicative coverage.

The insurance coverage offered by traditional car rental companies is fairly standardized. However, coverage varies widely amongst other types of car-sharing programs. The most important step is to read the car rental/sharing agreement — most companies clearly state what is covered as well as the supplemental coverage that can be purchased.

Regardless of the rental car option, I suggest making two phone calls:

The first call is to your insurance company, to find out how much coverage you currently have on your own car. In most cases, whatever coverage and deductibles you have on your own car would apply when you rent a car (providing you are using the rental car for recreation and not for business).

If you have dropped either collision or comprehensive on your own car as a way to reduce costs, you may not be covered if your rental car is stolen or damaged.

Check to see whether your insurance company pays for — or provides a rider for — administrative fees, loss of use or towing charges.

The second call to make is to your credit card company. Insurance benefits offered by credit card companies differ depending on the company and/or the bank that issues the card, and the level of credit card used (a platinum card may offer more insurance coverage than a gold card). However, most credit cards provide limited coverage, such as covering the deductible if there is a claim.

Brick-and-Mortar Car Rental Insurance

Consumers renting from traditional car rental companies can generally choose from the following coverages (note that insurance is state-regulated, and the cost and coverage will vary from state to state):

• Loss damage waiver (LDW): Also referred to as a collision damage waiver, an LDW is not technically an insurance product — it’s designed to relieve or “waive” renters of financial responsibility if their rental car is damaged or stolen. In most cases, waivers also provide coverage for “loss of use,” in the event the rental car company charges for the time a damaged car cannot be used because it is being fixed. An LDW may also cover towing and administrative fees.

• Liability insurance: By law, rental companies must provide the state-required minimum amount of liability insurance coverage — generally this figure is low and does not provide much protection. Frequent renters who don’t own a car can also purchase a non-owner liability policy, which not only provides liability protection when renting a car, but also when borrowing someone else’s car.

• Personal accident insurance: This covers the driver and passengers for medical and ambulance bills for injuries caused in a car crash.

• Personal effects coverage This provides insurance protection for the theft of items from a rental car. A homeowners or renters insurance policy includes off-premises theft coverage.

Car sharing and peer-to-peer rental insurance

The insurance offered by car-sharing and peer-to-peer rental companies is not standardized. It’s therefore important to go to the company’s website to read the insurance coverage information carefully. If you have any questions, call the customer service number listed on the website.

Car sharing programs, generally include insurance costs in the fee. However, if the car is involved in a collision or is stolen, the renter may be billed for a specific dollar amount stated in the membership agreement. For an additional fee, customers can purchase a “waiver” to avoid paying the accident fee.

A number of web-based peer-to-peer rental services offer both basic coverage and supplemental insurance. The supplemental insurance includes both coverage for damage to the car and liability protection, and provides a choice of coverage amounts and deductibles. Renters who do not purchase the additional insurance are required to sign an agreement stating that they declined the coverage.

This column was submitted by Jeff Zignego with information from Insurance Information Institute. Zignego represents multiple insurance companies offering a variety of personal and business coverage choices and customized insurance plans. He owns Lake Elmo-based Eagle Point Insurance Group, Inc. and can be reached at