Rental car insurance is usually the last thing on the minds of travelers as they prepare to leave for a vacation or business trip. But, it can be a valuable safeguard for travelers, especially for those who aren’t already protected by their personal auto policy or credit card issuer.

This insurance offers financial coverage for those who rent a car; it differs from rental car reimbursement insurance, which pays for the use of a rental car while your vehicle is being repaired following an accident.

What Rental Insurance Covers

Rental car agencies offer all sorts of protection for those who rent their vehicles, including those listed below. However, the types of coverages and their restrictions and conditions vary by the agency.
Loss Damage Waiver (LDW)

Sometimes known as a collision damage waiver (CDW), this protection acts like the comprehensive and collision coverage associated with personal car insurance policies. It covers the cost of damages done to your rental vehicle due to an accident, storm, fire, or act of vandalism, as well as the replacement cost if your vehicle is stolen. Some LDWs pay for towing expenses, too.

However, your coverage may be nullified if you caused an accident by failing to obey the local traffic laws.
Liability Coverage

Just like your liability coverage on your personal policy, this protects you against the expenses associated with property or bodily injury damages you cause to others. The rental agency will automatically give you liability coverage that’s equal to the state’s minimum requirements. However, those limits usually are low and can easily be exceeded in an accident, so this coverage gives you added protection.
Personal Accident Insurance (PAI)

This insurance is similar to the medical payments coverage found with personal auto insurance policies; it pays for the costs associated with injuries or deaths that you or your passengers sustain in an accident, up to the limit stipulated. Depending on the circumstances, your health or life insurance policy may also pay for some of these costs.
Personal Effects Coverage (PEC)

This coverage pays the cost of replacing items stolen from your rental car.

Who Needs Rental Insurance

Before you decline or accept the rental agency’s insurance, you should consider the situation from a few angles.

Personal Auto Insurance Policy

If you have a full personal auto insurance policy with adequate coverage limits, you may not need car rental insurance; everything it offers may already be covered in your policy. That’s except for the PEC, which may be covered by your homeowner’s policy. Check your policies, though, to make sure they apply to the use of rental vehicles, especially if you’re using the rental for business purposes.
Credit Card Insurance

Many credit card companies offer free rental insurance if you use their card to book the car. The extent of the coverage varies widely by the provider, but most only offer collision and theft coverage. Some credit card companies won’t offer protection on expensive rental models, too, so be sure to know exactly what coverage your card provides. Also, this sort of insurance is usually considered to be secondary, meaning it only kicks in if you don’t have any other insurance coverage in place.
Rental Car Insurance

Unlike with personal auto policies, you generally won’t have to pay a deductible with rental insurance. Plus, since you won’t be filing a claim with your carrier, you won’t be facing a possible premium increase. And, rental insurance can be simpler for you to handle, as you won’t have to deal with both the rental agency and your insurance company.

But, as discussed below, rental insurance can be expensive?sometimes costing as much as the base price of renting the car. And, your rental car insurance may be voided if you allow anyone else to drive the vehicle.

Note: Those traveling abroad should check with their insurance company, credit card issuer, or rental agency to see if the coverages provided by each apply to driving in foreign countries.

Where to Get Rental Insurance

Should you decide on using the rental agency’s insurance, you can select the types of coverages you want at the rental agency counter. But, depending on the agency, you may also be able to do this in advance when you make the reservation.

How Much Rental Insurance Costs

Rental coverage fees vary by the agency, but generally can be found for no more than the following per-day amounts:

• LDW: $20
• Liability: $15
• PAI: $5
• PEC: $5

Keep in mind you can just purchase the protection you need; you’re not forced to accept all the coverages the rental agency offers.