Why You Should Buy Rental Car Insurance

Last Updated Jul 19, 2010 9:49 AM EDT

So you are going on vacation this summer and renting a car. Before you log onto the rental car web site or pick up the loaner at the counter, you should think carefully about one of the first questions you will be asked; will you be purchasing rental car insurance?

Most financial and consumer reporters in the media will say to never buy it. But that advice is uninformed. Paying a few extra bucks for rental car insurance may be one of the smartest things you can do.

If you have auto, home or renters insurance, the first phone call you should make is to your current insurance agent, so says industry experts. Explain that you are planning to rent a car and ask how your existing insurance covers damage to the rental car and the loss of personal property.

If your auto insurance includes collision and comprehensive coverage, then this should also cover the rental car within the limits of your current coverage. Also, if you charge the cost of the rental car on a credit card, your credit card may include rental car loss damage waiver as a cardholder benefit.

But don't stop there assuming that because you have auto insurance with collision and comprehensive coverage, or charge your rental car on a credit card, that rental car insurance is a waste of your money. Here are three solid reasons why buying rental car insurance can be worth it.

  • In many states, auto insurance policies do not pay for the rental car company's "loss of use" - which is the loss of rental fees by the company while the car is in the shop for repairs. If you want to cover this, then you need to buy the rental car insurance.
  • Planning to drive the car out of the country? Before you do, check into the insurance limits required by those countries and you may find that your current insurance is lacking.
  • Another thing to consider is coverage for personal effects. When traveling with digital cameras, laptops and iPods, the chance something will get lost or stolen while traveling is higher. The costs to replace these items can really add up. If you have homeowners or renters insurance, particularly the form that includes replacement value coverage for personal property, then your current insurance should cover this. But many folks have increased their deductibles to $1000, $2500 or more to offset rising insurance costs. Only a loss in excess of the deductible will be covered by your existing insurance. Given the relatively low cost of personal effects coverage offered by rental car insurance, which averages about two bucks a day, the additional insurance is worth it.
Still not convinced? Then think about this. If you file a claim on your personal auto insurance policy for an accident you cause with a rented car (which may be more likely because you are driving an unfamiliar car in an unfamiliar location), your current auto insurance company may mark you as a higher risk driver. The result is an increase in your auto insurance premiums. It may be better to pay for rental car insurance for the few days rather than risk years of higher auto insurance premiums.
  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.