Does my car insurance cover a rental car?

Does my car insurance policy cover me when I get a rental car on vacation? The car rental company's insurance is expensive and I don't want to buy it if I don't have to.

Rental car insurance is always a sticky issue because of the differences in rental car company contracts and the wording of your personal auto policy. Since each rental company has different verbiage in their contract, and each car insurance policy is a little different, we'll be talking generalities below and leave it up to you to find out the specifics for your situation.

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Since you have a personal auto policy, you may have coverage that extends to your rental car. Most car insurance policies have wording that provides physical damage coverage to any 'non-owned auto' which is defined as any private passenger auto, pickup, van or trailer that is not owned by you or any family member and is being operated by you or any family member (this is not exact wording). A rental car fits into the definition of a non-owned auto, so physical damage coverage would apply either primary or excess IF you carry physical damage coverage on any of your own vehicles. If you only carry liability coverage on your personal auto policy, there would be no physical damage coverage provided to a rental car.

Please note: If you noticed in the definition of 'non-owned auto', there was no mention of truck, jet ski, 4-wheeler, motorcycle, etc. Your personal auto policy does not provide coverage for these types of vehicles. So the next time you rent a U-Haul truck or other vehicle that does not meet the definition of 'non-owned auto', make sure you check with your insurance company to see if any coverage applies.

Some states actually provide coverage for rental cars under the liability, rather than physical damage, section of the policy. This can cause issues if you have a low physical damage liability limit of say $10,000. Most rental cars have an actual cash value of more than that, so your coverage under the liability section of your policy would be limited.

Two states currently allow you to purchase endorsements to your personal auto policy that extend coverage specifically to rental cars. It's your responsibility to find out how coverage applies in your state, so if you're going to be renting a car, contact your current car insurance company (not your agent) and see what coverages will apply.

You may also want to contact your credit card company to see what rental car coverage may be available if you charge the full rental cost to your credit card. Many cards provide some limited coverage on an excess basis, which is not good coverage, but at least it affords some protection.

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There are many insurance issues and gray areas surrounding car rental. If you have any doubts about whether you have physical damage coverage, purchase the Loss Damage Waiver (sometimes called Collision Damage Waiver) from your car rental company. This allows you to drop off the car and walk away, regardless of the damage you did to the rental car. As long as you did not violate the terms of your rental contract, the waiver will save a lot of potential hassle if you damaged the rental car.

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