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Rental Car Insurance: Do You Really Need It?

You've planned your summer vacation, purchased your airline tickets, and are really looking forward to "getting away from it all" and spending quality time with your family. But navigating all those tourist attractions at your destination can be tricky. So you gather your maps, stow them in your carry-on, and pick up the phonebook or go online to find a cheap rental car.

Do I Want What?

Upon selecting the most comfortable car you can reasonably afford, the voice on the other end of the phone asks if you would like to purchase a collision-damage waiver or personal liability insurance with that contract. You pause, not even sure what a collision-damage waiver (CDW) is, let alone whether or not you need to purchase one. And personal liability insurance…isn't that covered under your car insurance policy?

The Uncertainty of It All

If you don't have all the answers, don't be discouraged. This scenario, all too frequent, reflects the general lack of knowledge most consumers have concerning rental car insurance. Most of us don't know what it is or what it covers, and usually end up with either too much or too little insurance coverage. It's not until we have an accident while driving that rental car that we find out just how much protection we really have—or don't.

So, how do you decide if you really should buy that rental car insurance?

Finding the Answers

Your Own Auto Policy

First, talk to your insurance agent and examine your personal auto insurance policy to determine what types and amounts of coverage you hold on your own vehicle. Your personal auto insurance policy usually covers your rental car at the same predetermined limit amounts.

If you have enough existing collision and comprehensive coverage, you probably don't need to purchase that CDW to protect your rental car from damage. And, if your own auto policy contains sufficient liability coverage to protect other cars and passengers on the road, you may not need the rental company's personal liability insurance, either. However, if you decide to rely on your personal auto policy, make sure your coverage levels are set high enough to cover the type and make of vehicle you are renting. If you are involved in an accident and your rental car is damaged or you are injured, you will only be covered to the limits of the policy on your own car. This may not be sufficient protection for that sports car you have your eye on!

If you don't have auto insurance at all—or if your own car's value is significantly less than that of your rental car—it may be a good idea to consider purchasing a CDW and personal liability protection from the rental car company. Although this waiver is not real insurance, it does keep you from being held personally responsible if your rental car is stolen, vandalized or involved in an accident. In addition, some form of personal liability coverage is definitely recommended, as damage to other cars and injury to other passengers won't be covered without it. The CDW will cost you around $8-$19 per day and liability coverage about $7-$14 per day—a small price to pay for what could turn out to be a financial lifesaver.

Credit Card Coverage

Next, check with your credit card companies to see if they offer rental car coverage—and if so, what kinds and in what amounts. Ask plenty of questions, and make sure you understand exactly what is covered and what is not. If you have more than one line of credit, call each company and compare offerings to find the best deal.

Final Comparison

Finally, gather all the information you have garnered, compare the rental car company's insurance to your own auto policy and credit card coverage, and make an informed decision.

Coverage Precedence

Protection purchased through the rental car company usually supersedes that of your own insurance policy or one purchased through your credit card company. In other words, any insurance coverage you purchase from the rental company takes precedence over your own auto or credit card policy. So don't overextend yourself with the expense of additional or duplicate coverage if you already have sufficient insurance elsewhere.

Prepare—and Get Going!

Now that you understand some of the essentials, spend some time preparing before you reserve that rental car. Find out what the rental company has to offer, research your own auto policy and credit card offerings, and comparison shop for the best coverage at the best price. Then make that call, relax—and enjoy your vacation!

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