rental car insurance?

You’re planning that long-awaited, well-deserved vacation. You’ve researched the itinerary, booked the airfare and hotels, and even made some restaurant reservations. Nothing left to do but arrange for transportation to the airport. Right?

Wrong. There is one more important decision to make before you leave for your trip. You will need to determine if you should pay an additional fee for insurance on your rental car. Here’s what you need to know in order to decide:

Understand your existing car insurance coverage.
This should already include liability coverage, which pays for another person’s medical bills or property damage if you cause an accident; it may include comprehensive coverage to repair your vehicle if it’s damaged by an event other than a collision, as well as collision coverage to repair damage from a collision. In many cases, this coverage will extend to your rental car as well as your own vehicles.

If your vacation plans are taking you overseas, your existing car insurance will not cover your rental car. Note that many countries require you to have an international driver’s license, and some countries (including Greece and Ireland) have an upper age limit of 75 or 80 in order to rent a car. Check online for any specific restrictions of the country you’ll be traveling to.

Understand what your credit card offers.
Many credit cards offer free rental car insurance that kicks in automatically when you use the card to pay for the rental. That being said, the amount of the coverage can be limited to a relatively small dollar amount and is often secondary coverage that pays out only after your primary insurance has been exhausted. Read the fine print on your credit card agreement to understand what is being offered.

Understand what the car rental agency is offering.
Similar to your existing coverage, the insurance being offered should include liability coverage, in the event you injure someone or damage their property while driving. Though the rental car company may recommend supplemental liability insurance, you are likely adequately covered by your existing car insurance, as well as your umbrella insurance policy.

Collision/damage waivers will cover the cost of any damage caused by a collision or if the car is stolen. Though you may already pay for comprehensive and collision coverage, you will need to cover the deductible before you receive any proceeds to cover the cost of an accident while on vacation. In addition, existing insurance will not cover any fees charged by the rental car company for loss of rental income while the car is being repaired. It may make sense to purchase this waiver, which gets you off the hook for any damage or theft of the car. Be sure to read the fine print to understand all potential charges if you were to damage the rental vehicle.

You may also be offered Personal Effects Coverage, to cover any personal items stolen from the rental car, as well as Personal Accident Insurance, to cover any medical bills resulting from an accident. This coverage may duplicate coverage you already have from your homeowner’s insurance, health insurance or car insurance.

Insurance offered by rental car companies is expensive and often duplicates policies you already have in place. Avoid a rushed, uninformed decision at the rental car desk by researching your existing car, homeowner’s and medical insurance coverage before you leave as thoroughly as you research your itinerary!

Laura I. Rotter

Laura I. Rotter

Laura I. Rotter, CFA, MBA and CFP certified, is founder of True Abundance Advisors, a fiduciary, fee-only financial planning firm. She works with clients remotely or in person to help them clarify their goals, and develop an integrated plan to achieve those goals.Call her at 914-222-0832 or email Laura@trueabundanceadvisors.com to schedule a free initial consultation.
Laura I. Rotter

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