What you need to know about liability and insurance when renting a car.

At one time or another, you will probably find yourself renting a car.  Maybe you are on vacation, or your car is in for repairs after a car accident, or you want to try out a certain model car before buying it, what do you need to know about insurance and liability?   

When renting a car, you will be quoted a rate per day or rate per week.  But when at the rental counter, the rental agent will ask you if you want supplemental coverage.  The first type of supplemental insurance covers you if you damage the rental car.  The agent will tell you that if you cause an accident and damage the rental car, you are responsible for the damage.  This is true, but most credit cards provide insurance if you damage a rental car.  You should check with your credit card when you rent a car.  This means that you should decline supplemental coverage if your credit card covers damage to the rental.  There is no reason to pay the rental car company for coverage which your credit card provides. 

Another type of supplemental coverage is for liability.  Liability coverage is if you cause an accident and damage someone else’s car or injure someone in an accident.  The rental car company will encourage you buy liability insurance for an additional fee.  However, if you have your own car insurance, it likely covers you for liability.  Car insurance typically covers the car you insure as well as a “temporary replacement vehicle.”  In almost all circumstances, a rental car will qualify as a temporary replacement vehicle which means you do not need to pay for supplemental liability insurance. 

There is an important exception when your car insurance will not cover you for liability coverage.  Most car insurance policies only cover you for liability if you rent a car and drive within the United States.  So, if you rent a car out of the country, you should purchase supplemental liability insurance.  Credit cards typically still cover you for damage to the rental car while out of the country, but your car insurance usually does not. 

So, while renting a car in the United States on a credit card, and so long as you have your own car insurance on another vehicle, you should decline the supplemental coverage offered by car rental agencies.  In fact, the supplemental coverage offered by the rental agencies will state that it only pays AFTER any other coverage in effect has paid.  This means, even if you disregard my advice that supplemental coverage is not necessary and pay for additional coverage, the supplemental coverage will not pay until the credit card and/or your car insurance have paid!   

Charges for supplemental insurance coverage by rental car agencies is a big profit center for them.  Under almost all circumstances, you should decline supplemental insurance and the associated fees.