Should I Pay for Insurance on a Rental Car?

By Megan Renart

Maybe you’re signing the paperwork for a rental car, ready to zip up the West Coast for a week in the sunshine, when the agent asks if you’re also going to be adding rental insurance.

You pause. The agent starts talking about liability, and you see dollar signs piling up. You ask yourself: “Do I really need rental car insurance?”

“It’s not so much of a ‘should’ or ‘shouldn’t,’” says Rich Lunsford, USAA CERTIFIED FINANCIAL PLANNER™ practitioner and advice generation director. “It’s a personal choice.”

The truth is there is no clear-cut answer when it comes to purchasing insurance for your rental car, so it’s easy to understand why you’re hemming and hawing.

Most personal auto insurance policies have coverage that will transfer to the rental car, so technically, you’re covered while driving the rental.  The choice is whether or not you want to use the rental company coverage for their car so you don’t have to use your own policy.

If your insurance is covering the car, then your deductible comes with it. So if you’re liable for a fender bender while driving a rental car that causes $4,500 of damage, and your deductible is $1,000, you must fork over that amount — all for a car you don’t own.

The coverage offered by the rental car company is generally much more expensive than your personal auto policy coverage, so if you don’t get into any incidents while driving, you may have opted for an unnecessary expense.

“The bottom line is that the coverage from the rental agency has value,” Lunsford says. “The question is whether the value is worth the extra expense to you.”

But What About Credit Cards Covering Rental Car Liability?

“It is true that some of your major credit cards offer rental car coverage if you utilize their credit card to rent,” Lunsford says. “They usually cover items like towing, theft or damage to the rental car itself. However, a key issue is that many credit card companies have exclusions for damage you may cause to others while driving the rental car.”

In short, credit cards don’t offer liability coverage while you’re driving the rental. Some do, but most don’t.

“For this reason, I’d be leery about depending solely on the credit card company for liability protection while driving the rental car,” Lunsford says.

If you’re traveling for work, your company may pick up the tab for the rental and the insurance from the rental agency — score! In other instances, larger corporations may choose to cover the liability without paying for the insurance from the rental agency. It’s best to check your company’s policy toward the rental insurance before standing in the rental car line at the airport to be prepared. 

Renting a car anytime soon? Check out our car rental discounts and benefits for members.


Alliance Services provided through USAA Alliance Services, LLC.

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

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