Insurance Tips for Driving Rental or Borrowed Cars

You do not need to own a car to be a frequent driver; many drivers use rental or borrowed cars to get around. Alternately, you may travel often enough that you rely on rental or borrowed cars almost as much as your own vehicle at home. When driving a car that doesn't belong to you, how do you address the issue of auto insurance and personal liability for an accident in which you may become involved?

When renting a car, many car rental companies will try to charge you extra fees for insurance. There are a number of car insurances that the rental car company will try to offer you, including the following:

Collision damage/loss damage waiver (up to $19/day). This is not actually an insurance per se but rather an assurance that any liability for damage to the rented vehicle will be shifted from you to the car rental company. The waiver also covers the loss of time for the vehicle while it is being repaired.

Liability insurance ($7-$14/day). This insurance provides coverage of up to $1 million for car collisions and associated damages.

Personal accident insurance ($1-$5/day). This type of insurance covers any medical and ambulance bills that result from a traffic accident. Personal accident insurance covers both the driver and the passengers.

Personal effects coverage ($1-$4/day). This policy covers personal items that are left in the vehicle such as laptops, GPS gear and cash.

What you may not realize is that your own car insurance policy usually covers the theft or damage of a rental vehicle; liability insurance is therefore not necessary. Likewise, if you use a major credit card to pay for your rental car, the credit card itself may also insure your rental vehicle against damage or theft. Medical costs are typically covered by your own health insurance plan or by the personal injury protection portion of your auto insurance policy. Thus, many individuals who rent cars end up paying twice for the same coverage.

What about personal effects coverage? If you travel frequently, you may wish to obtain a floating policy through your home or renter's insurance policy that covers valuables both at home and while on business/vacation.

What if you don't own a car at all and always rent or borrow cars? It may be cost-effective to obtain a non-owner liability policy from an insurance provider; this policy costs $200-$500/year.

Keep in mind that different countries have different rules about what constitutes adequate auto insurance. Canada only requires that you obtain a Canada-equivalent proof of insurance from your current insurance provider. Mexico, on the other hand, requires that you purchase Mexico-specific (i.e., separate) insurance at the border.