Types of Rental Car Insurance

When you take a business trip or fly to another state on vacation, you likely pick up a rental car at the airport. But whether you're paying the tab or your employer is, rental car insurance is a necessary evil. You don't want to be on the hook for the repairs if you cause damage to the rental car or to someone else's property.

There are several ways to obtain rental car insurance, however, so it's a good idea to have a plan ahead of time. Knowing your options will prevent you from overspending or purchasing redundant coverage.

Existing Coverage

You might not need to purchase additional car rental insurance if you already have existing coverage through another product. Your own car insurance, for example, probably covers you if you're driving someone else's car, but you might not have enough of it.

For example, I own a 1999 Mazda pick-up on which I carry only liability insurance. Neither collision nor comprehensive seems worth the monthly expense, since any significant damage would cost more to repair than the vehicle is worth. Consequently, if I rent a car, I buy rental car insurance so I cover any potential damage to that vehicle.

You might also be able to skip rental car insurance if you're covered through some other program. Credit cards, auto club memberships and the like might extend to you coverage when you rent a car. Just make sure you know the terms under which that coverage is offered. Exclusions are popular with credit card companies, and might limit your ability to cover damages.

Damage Waivers

In most cases, you can buy rental car insurance in the form of damage waivers for both collision and liability. These waivers can cost up to $20 per day, according to USA Today, and protect you from liability if the rental car is damaged, stolen or vandalized.

This is the type of rental car insurance most commonly purchased, especially among people who don't have their own car insurance policies or whose policies are limited to liability only. A damage waiver keeps you off the hook for any damage that occurs to the car you're driving.

Supplemental Liability

I purchase this type of rental car insurance more often than not, though it's more for peace of mind than anything else. Supplemental liability insurance basically increases the amount of damage you can cause while driving the rental car without having to dip into your own wallet.

It might seem like overkill to extend your liability coverage to $500,000 or $1 million, but what if you slam into a rare Italian sports car? Or run off the road into someone's house? While this might be unlikely, the goal is to protect yourself against any potential problem on the road.

Evaluate your current liability insurance levels and determine if supplemental insurance is necessary.

Personal Accident Insurance

The purpose of this type of rental car insurance is to pay for medical treatment if you or any of your passengers is injured in a crash. However, it is usually superfluous if you already have this type of coverage on your personal vehicle or if you carry medical insurance.

Personal Effects Insurance

You can also purchase rental car insurance to protect any valuables you might have in the vehicle. If your laptop is stolen out of the rental car during a business trip, for example, personal effects coverage would pay for that loss.

Buying Rental Car Insurance

My advice is to do your homework beforehand. Every time I've rented a car in the past, the salesperson at the front desk has attempted to pressure me into buying all kinds of package insurance deals and extraneous coverages that I don't need. If you already know what you want to buy, it won't be as easy for the salesperson to pressure you into spending more money than necessary.

You can also call your own insurance agent to ask how and when you are covered for a car rental. This way you won't be making assumptions, and you'll know exactly what will happen in any eventuality.