What kind of insurance do I really need when renting a car?

Rental car companies will try to sell you coverage at the counter, and it's not cheap -- depending on the type of insurance you get, it can add $20 or more a day to your total bill. A little preparation and planning can help you save money.
Before you rent
If you plan on renting a car, the Insurance Information Institute recommends calling your auto insurance company to see what is covered under your own policy. Any limits and deductibles you have for your own car would apply to the rental car (unless you're using the rental for business purposes).
Make sure you find out what exactly is covered. For example, if you have collision coverage on your policy, but not comprehensive coverage, you'd be covered if the rental car crashes into a tree but not if it's stolen. Be careful not to mistake rental reimbursement, which many policyholders have, with rental car coverage. Rental reimbursement coverage pays for the cost of a rental car while your own car is being repaired -- not for insurance on a rental car.
Next, call your credit card company. Most car rental companies require you to pay for your rental with a credit card, and many credit card companies will cover rental car insurance benefits if you get your rental with their card. Be sure you know exactly what benefits your card provides.
Types of rental coverage

If you are not covered by your own insurance, the rental company typically will offer four types of coverage, according to the Insurance Information Institute:
  • Collision damage waiver: This prevents you from having to pay if the car is damaged or stolen. Buying this coverage usually will prevent you from having to pay "loss of use" charges while the car is being repaired. Keep in mind that you may not be covered if the damage was caused by speeding or drunken driving.
  • Liability: This covers any injuries to others you cause while behind the wheel, as well as damage to others' property.
  • Personal accident: This covers your medical bills and those of your passengers.
  • Personal effects: This reimburses you if any of your property is stolen from the rental car.

Should you buy rental coverage?

If you already have health insurance, you may not need personal accident coverage, for example. Also, according to the Insurance Information Institute, your renter's or home insurance will cover your property, even if you're away from home. In other words, if your laptop is stolen, your home or renter's insurance would cover it up to a certain amount after you've paid your deductible. If you travel with valuable or expensive items, you may want to get a home insurance floater that provides higher amounts of coverage.
Still, keep in mind that a rental car company may impose several fees that your personal insurance may not cover. According to the Insurance Information Institute, these may include impound, towing and storage fees.

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