Very common question. The answer is “it depends.” If you are renting a car personally, you will need a personal auto policy with at least one vehicle which is covered for comprehensive and collision coverages. If you have these coverages, they should extend to a rented vehicle which is a temporary replacement for the vehicle that you own. Does not matter whether your car has broken down, was in an accident or you are on vacation, you should have the protection from your personal automobile policy. The deductibles on your owned car are the deductibles which will apply to a claim involving the rental car. This means you will be responsible for this deductible amount if the rental vehicle is damaged. If you do not have comprehensive and collision coverages, or you do not have a personal automobile policy, you need to purchase the collision damage waiver offered by the car rental agency. Please keep in mind that your personal automobile insurance policy will not cover the rental agency’s loss of use of the rental car. In other words, the rental agency still wants to be paid for the time they cannot use the car, while it is being repaired. This is a risk people often forget about and wind up coming out of pocket to cover.
The collision damage waiver offered by the rental agency will cover this risk. However, the rental contracts for most car rental companies are not written in your favor and contain a lot of caveats. You need to read this contract before signing. If you are traveling far from home, but still within the United States, you should consider purchasing the collision damage waiver from the rental agency. If you have an accident in a rental car a thousand miles from home, this is often logistically difficult to handle and you may want the opportunity to just hand the problem back to the rental agency. If you are renting a car outside of the United States, its territories and possessions, always, always, always buy the rental damage waiver from the rental agency. Your insurance policy does not cover you outside of United States boundaries.
But you may say “Bruce, I have an American Express Card, won’t they cover me?” Maybe. Some credit cards do provide this protection for renting a car. However, do not assume that they will cover your risk here. Call the credit card customer service number and ask how and where they will cover you for rental cars. Credit cards often require any other valid collectible insurance to pay before they will pay. If this is the case, they may expect the rental car agency’s policy to pay first and they will pay as a secondary payer. Your rental contract does not allow this and you could wind up in a spat between the credit card company and the rental agency.
If you have any questions about renting a car and insurance coverage related to this rental, always call your insurance agent and ask those questions before renting the car. Your agent should be very happy to answer these questions. This call may save you an unfavorable surprise later.