A post detailing why you shouldn't get rental car insurance next time you rent a car. Most credit card companies can cover the deductible that you would normally
After booking my trip to Hawaii the other day, I started thinking about the last time BF and I were in Hawaii.  I remember we rented a car, a GPS, and paid for car rental insurance.  What started off really cheap (free day of rental car with the Go Oahu Card) ended adding up to $50 a day.  Good thing we rented it for only one day. I definitely won’t be doing that again this time (buying car rental insurance, I mean).

How did this happen?

Well, the GPS cost $11.99 per day (she was invaluable- I think a lot more arguments would have cropped up were it not for the GPS telling us where to go.  I must admit I’m not a very good navigator.

The car rental insurance cost us $30 a day.  We really thought car rental insurance would be crucial because the last thing  you want is to have your trip ruined by a motor vehicle accident.  Even a little dent could cost us hundreds of dollars to pay back to the car rental company.

Contrary to popular belief, car rental insurance isn’t actually insurance. It is the coverage of the deductible should the car rental be in a collision causing damage.

Then one day as I was reading my credit card agreement for fun (yes, sadly, reading credit card agreements are my form of entertainment), I came across some of the “perks” of my credit card.  One of them was that car rental insurance was included, provided that you pay for the car rental (or portion of it) with the credit card.  Namely this was labeled as “Supplemental Auto Rental Collision Damage“.  It isn’t insurance, but it helps eliminate the high deductible that you would have to pay should the rental car be in an accident causing damage

One has to keep in mind that if you say “yes” to the car rental company’s deductible coverage and PAY the $20-$30 a day extra, you say “adios” to any extra coverage that your credit card company might offer.  So it’s either one or the other, not both.

Therefore, it is probably a better idea to save yourself the $30/day and pay for your car rental with your credit card.  The rental car company might ask to keep your credit card on file/with them in their office so that they can use it should you damage the vehicle.  It’s best to bring two credit cards on your trip (I’ve learned this the hard way on my travels- got a call from the Mastercard company one time in South America to notify me that my credit card seemed to be compromised and they will mail me one at home in a few weeks).

If you end up in an accident, the rental car company could charge your card.  You will then need to contact your credit card company (and although it is a laborious and annoying process- it’s worth it to save your money) to submit documents etc. in order to get your claim approved.

Best to check with your credit card company to see how much the coverage is for your rental car before you rent the car.  Usually this extra coverage from the credit card company is with “platinum” cards, “gold” cards etc., so don’t expect the credit card you got approved for while you were a student to give you this perk.  Peace of mind when it comes to traveling is a good thing.

After talking to some of my friends who often rent cars, they were aware that rental car insurance is a “scam” and that most credit card companies can help you out.

Did you know about this?  Was I living under a rock again? At least I know now- I won’t be buying any car rental coverage this time around in Hawaii (but will check with the credit card company first before I go).  I know that credit cards can be a dual edged sword, but I think that if you pay them off with discipline and don’t carry a balance, they can be a great personal finance tool to have.

Article comments

30 comments
Brian says:

Is there any cheaper car rental insurance,besides for the rental company and the credit card.Which auto insurance companies which can cover you for say 3 days to 5 days.

Kyle says:

Sure Brian. Check around online. LowestRates.ca would be my first stop.

Nathalie says:

As far as I know, no credit card covers you for liability if you get into an accident causing injury to a third party. I’m curious to know if anyone knows of a credit card that does.

Kyle says:

This is my impression as well Nathalie. I am also unaware of a Canadian credit card that offers third party.

Zarkz says:

In Europe, They force me to take insurance. They say that CC insurance isnot valid in Europe. Specifically I was in Croatia.
Are they trying to rip me off?

Kyle says:

I wish I knew Zarkz. Doesn’t sound like you have any choice though?

Billie says:

Hi Young,
I’m a new reader and just browsing through your site. I’ve definitely found it to be really helpful and inspiring so keep up the great blogs!
This topic stood out to me because when I went to San Francisco last month my boyfriend and I did pay for the car rental insurance because while my boyfriend’s card covered the car damage and deductible, it did not cover third party liability. So I guess that is what we were paying for when we rented that car for a week, because who knows if you end up injuring someone. That could be another headache.

I also just read @Suba’s blog and some credit cards are a bit loopy about their actual coverage… so I guess what I’m trying to say is, from my experience, it would probably depend on how long you were actually renting a car if you are choosing between paying or not paying the car rental insurance expense. If you were only renting a car for the day it probably is better to save on the car rental insurance, but if you were taking it for a whole week… better to be safe than sorry, which is the route we took I guess.

Great blog! I definitely look forward to reading more.

Billie

Daniel says:

What I am going to tell is just my point of view, but I know most of the time insurance plans for cars are not as should be. As you said up there, there is no real insurance, it’s just a little help. What else can we expect of 30 dollars per day?

I’ve been declining the coverage lately, though I have to read my card details to see if I have anything through them!

young says:

@Tom- ooh living life on the edge, eh? Yeah, most credit cards do (especially if you have a platinum or gold card with extra perks).

Great tip, this can end up saving a lot of money for travelers! I think that most credit cards I’ve had offered this type of perk. I’ll have to look into it more carefully before I travel again.

Thanks!

Little House says:

I kind of knew this, but I don’t rent rental cars very often so this refreshed my memory! One of my newer cards stresses their perks and rental car coverage is one of them. The next time I have to rent a car, I’ll be using that card instead of paying extra!

Forest says:

I don’t actually drive so not had much need for car rental. However I did read something along these lines this the other day so it’s something to bear in mind if traveling with my partner anywhere where we need to rent.

I don’t have a CC card but may be worth checking hers out.

Good post! I won’t repeat the credit card perks, oops, I guess I did 🙂

How many times have you been to Hawaii? I read “…the last time BF and I were in…” above. Curious. You go back often?

young says:

@Financial Cents- Hm this will be the second time. We went two years ago and did the same thing. I didn’t want to go back (would rather see something new) but BF wanted a stress free vacation and some sun time. 🙂

I have to come out of lurking for this post 🙂 I always read your blog from my reader, never commented. So first a big “Hi!!” 🙂

Yes, the CC are great for supplemental insurance, but before you go check with your primary insurance too. There are a few complications that you should be aware of to make sure. I wrote a whole post about this. If I can include it – http://www.wealthinformatics.com/2010/06/26/should-you-get-rental-car-insurance/

young says:

@Suba- Hi Suba! Welcome!!! I’m surprised this post inspired the “lurkers” to come out and say hello! Thanks for sharing your link- I’ll be sure to check it out. Thanks for subscribing too 😉

Wow – $30 a day is crazy! I had *heard* about this before, but never really knew if it was legite. I will definitely check out my credit card statement and see if it has anything about rental car insurance on there!!! Oh, and Hi, I’m coming out of lurking! 😀

young says:

@Amber, Blond and Balanced- Hi Amber! I didn’t know you were lurking! =) Thanks for commenting 🙂 Or you could always call your credit card company to make sure (I love that they are open 24 hours and they are always so nice and friendly with their customer service). I don’t know if it’s for all credit cards- like I would doubt they have it for student credit cards.

Young,
Great tip. It’s always good to look over those credit card perks. Depending on the card, they can offer things you normally wouldn’t think twice about.

young says:

@Arjun- Yeah- sometimes the fine print is good to read (in this case it is, in most cases, it isn’t!). 🙂

I didn’t know that about the car insurance they “sell” you! I always used the insurance with my credit card because it was free. I didn’t know how great it was until I got into a fender bender with a curb and didn’t have to pay a dime of the $800 repair job (although they did charge it to my card and then the credit card company refunded it a couple weeks later). The paperwork was annoying but totally worth it.

young says:

@Jenn- Wow $800 repair- that’s great! Good thing you knew about it. The same thing happened to me when I used the insurance on my credit card for things that I have bought. I bought my BF an ipod classic (back in the days) and his car got broken into and it got stolen. It took me a long time to get the paperwork sorted, but it was worth it.

Echo says:

Thankfully my last employer had a policy not to take rental car insurance since it was included in our company p-card coverage.

I didn’t know about it before that, and the rental car companies sure push it like crazy, and harrass you even when you decline.

As the saying goes, fool me once…

young says:

@Echo- wow, your employer sounds fantastic! You’re right about them harassing you even when you decline- they give you scenarios and how much it would cost you if you said no, they’re good. real good.

SavingMentor says:

Yes, I did know this and I actually have extensive information on the best credit cards in Canada on my site along with the various insurance options that they offer. I’ve actually read most or all of the insurance agreements for every card I have listed on my site. Talk about fun reading 🙂

However, I do have one word of caution to you young, and to your readers. The car rental insurance that is provided through your credit card is only for collision damage to the rental vehicle or the cost to replace the vehicle if it is stolen (CDW & LDW).

If you get in an accident and there are people injured or you damage someone else’s car, then this coverage will not be applicable. You might also think that your regular insurance will kick in. Well, depending on the province you are in and the type of insurance you have, it might. But I know in my province our insurance covers the car and not the driver, so if the car you have insured is not involved in the accident, there is no coverage.

The laws for rental cars also vary from state to state and province to province. Some places require rental car companies to include this liability insurance with the rental. Other locations allow you to purchase it as an add on. Still others may not even offer it (unlikely).

Personally, I found it way too confusing to figure out which places include the coverage every time I rented a car so I just called my insurance company, asked them about it. They informed me that no I wasn’t covered so I bought an umbrella liability policy that gives an extra 1 million on top of my regular coverage and a flat 1 million coverage if I am in an accident in anyone else’s vehicle, including a rental car.

I figured it was better to be safe than sorry! This only costs me about $5 a month. Liability coverage at a rental car company, if offered, can cost up to $15 a day. I think it’s worth it, especially since it doesn’t just apply to rental cars.

young says:

@SavingMentor- Thanks for pointing that out! Very good point. $5 a month is not bad at all. Better than $25 a day!

Jennifer says:

It’s also a great idea to check with your current car insurance carrier to see if they have any car rental coverage options available. In BC, if you’ve purchased the roadstar or Roadside Plus coverage, you automatically get some car rental coverage. Even if you don’t have a car, but are a licensed BC driver, you can purchase much better rental car coverage for only $10/day – much cheaper than the rental car companies charge!

young says:

@Jennifer- I didn’t know that! I’m roadstar too =) I’ll check it out next time I’m at an autoplan dealer. Blogging is so great- you get to learn so much every day! Thanks guys. =)