If you're travelling overseas, at some point you might want to rent a car during your trip. Whether it's work-related or for a holiday or vacation, a rental car is convenient and often faster than public transportation. But, declining the "extra" insurance offered at the rental agency might be a big mistake. People sometimes waive additional coverage because they don't want to incur the extra cost. However, they're assuming full liability if the vehicle is stolen or damaged.
Here's what you need to know about the risks of not purchasing the additional insurance and a few options for adding the liability insurance you need.
What's Included in Car Rental Insurance
When people travel abroad, they look for ways to save money. They'll purchase travel insurance to cover flight interruptions and lost or damaged bags. They'll find discounted airline tickets and hotel deals. But, they sometimes skimp on car rental insurance - and that can cost you. The extra insurance that's offered is called a collision damage waiver (CDW) or loss damage waiver (LDW).
The CDW covers you if the vehicle is stolen or damaged. CDWs can vary from about $10 to $30 per day. If you only have the rental for a day or two, it's not that much. However, if you have the rental for two or three weeks, it can add up. But, you still need the coverage. Why? The rental company can come after you for any damages or if the vehicle is stolen.
People decline the CDW because they assume it's "extra" insurance they don't need. The problem with declining it is you're then under-insured if something happens. Without the CDW, the rental company can charge you for damages and there are other fees they can charge.
These might include:
- A loss of use fee for their lost revenue
- Towing charges
- A diminished value fee for the damage incurred
- Administrative fees for filing claims
Risks of Having a CDW Versus Not Having One
If you're unsure about when to sign the CDW versus when not to, there are risks you should know about.
If you say "no" and waive the CDW, why it's risky:
If you do not sign the CDW: The car rental company can come after you for the money owed towards a replacement vehicle (if it's stolen) or to fix it (if it was damaged). Hence, you will pay more out-of-pocket for damages by waiving it. This can be thousands of dollars depending on the value of the vehicle and the damage.
But, in some cases, it's okay to say "no" to the CDW and waive it. You may not need the CDW if:
- Your holiday is in the US or Canada and have your own auto insurance that includes the optional coverage for rental vehicles - note, your personal insurance won't cover you overseas
- You have third-party car rental insurance
- You have car rental insurance through your credit card company
If you say "yes" and sign the CDW, here's what happens:
If you do sign the CDW (recommended for those without insurance): If something happens to the rental (damage, theft), then the rental company cannot come after you for damages. Signing the CDW means they surrender their rights to charge you for any damages. The only exceptions might be for gross negligence or damage to tires (this varies by insurer).
You do need the CDW if:
- You don't have your own auto insurance
- You don't have a credit card with primary car rental insurance included
- You don't have third-party insurance
If you say "no" to the CDW because you have insurance, here's what happens:
If you do not sign the CDW because you have auto insurance and are inside the US or Canada, or if you have third-party insurance or insurance through your credit card company, and the vehicle is damaged or stolen:
- You'll pay the deductible
- You'll pay for repairs upfront
- You'll have to wait for your insurance company to reimburse you
Other Ways to Insure a Rental Vehicle
If you want to decline the car rental's CDW, there might be cheaper alternatives you can explore.
Check with Your Credit Card Company
A great way to find out if you have optional car rental insurance is to check with your credit card provider(s). They may offer primary rental car insurance or a basic policy that you can use during your trip. In some cases, it's primary if you don't have your own existing auto insurance policy. If you do, then this would serve as supplemental or secondary coverage and any claims would go through your primary car insurance first. As previously stated, you will pay your deductible, pay upfront for any damages and wait to be reimbursed when you file a claim.
Note: Check with your credit card company as benefits often change and there may have been changes since the last time you confirmed the details of the rental car insurance coverage offered.
Questions to Ask Your Credit Card Provider
When contacting your credit card company, or companies if you're shopping around, a few questions can help you confirm the rental car insurance coverage they offer. While they might all offer primary rental insurance, they may have different benefits.
Questions to ask might include:
- What type of vehicles are included under this policy? Which are excluded?
- Is the car rental insurance available in the country you are visiting?
- Will it apply to a truck, RV, motorcycle or moped? (If applicable)
- How many days is the policy coverage good for and what if you want to extend it?
Use Your Own Auto Insurance
The other way to insure your rental is through your own insurance. If you're waiving the CDW and not using insurance through your credit card company or purchasing third-party insurance, you can use your own auto insurance provided your policy includes the optional coverage for rental vehicles. Use your own auto insurance as the primary insurance if it includes collision coverage as it might cover short-term rentals. Confirm it applies to the country you're visiting and the type of vehicle you want. Your Canadian insurance will usually cover you in the Canada and the US only. If you're renting a car in Europe, Asia, Australia or anywhere else, your own insurance is not likely to cover you.
As noted above, if the vehicle is damaged or stolen, you'll pay your deductible, pay for repairs upfront and wait for your insurance company to reimburse you.
Make the Right Decision About Your Car Rental Insurance
Driving a rental car without liability insurance is taking a big risk. But, you don't have to purchase insurance from your car rental company. Weigh your options to avoid any unforeseen headaches. If you already have car insurance, you might want to waive the extra insurance offered. If you don't have existing auto insurance, check with your credit card company. They may offer primary rental insurance you can use. If they don't, you can purchase your car rental insurance online through a third-party. That way you're protected if something unexpected happens.