Rental Car Insurance – Accept or Decline?

If you’ve ever rented a car, you know that the agent strongly encourages you to purchase insurance coverage, usually at a cost of $9-$15 per day.  Upon choosing to decline the coverage you are required to initial what seems like a dozen different places on the contract to affirm your decision.  It always makes you wonder if you made the right decision.

The answer is – that depends! 

It is true that most auto insurance policies include coverage for rental cars, but much rests on the value of the policy you chose in the first place.  Rental cars are usually fairly new, so their replacement cost is high.  Is the value within the liability limits of your insurance policy sufficient to cover that cost?  If you’re driving an older vehicle that has depreciated, you’ve benefited from your rates declining to reflect the replacement cost for that vehicle, but that won’t be enough to cover the Ford Focus rental car that only has 8,000 miles on it.  In this case, rental insurance may be a good idea.

Something else to consider is loss of use for the rental car.  If you are in an accident and the car is in the shop for a while, the rental car company will charge you for their loss in rental income, which isn’t covered by your insurance policy.  Your auto insurance likely won’t cover any towing or storage costs either. 

Since your auto insurance rates are based on driving history, having an accident with a rental car could affect the coverage cost on your personal vehicles for years to come.  Purchasing the extra insurance would prevent the insurance company from becoming involved in the claim, and keep that accident off your record. 

It is possible that you will have some insurance coverage through the credit card used to pay for the rental, especially gold cards or better, but this amount can vary greatly.  Confirm the level of this benefit prior to renting the car if this is what you are counting on.

So know before you go!  Make sure that the liability limits of your personal auto insurance are sufficient to cover the car, as well as what you can expect from the credit card company in case of an accident.  If you’ve already got claims or tickets against your car insurance policy, consider the consequences on your rates of having an additional incident.  Weigh the risks against the cost, and you’ll see whether paying a few more dollars now may actually save you many more in the long run.  Only you can decide, but now you know the things to consider before making that decision.