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The four products at the rental counter overlap, in different ways, with what your auto policy, homeowners policy and credit card may already provide. Here is what each one does and when buying it makes sense.
The rental counter turns a cheap booking into a decision worth hundreds of dollars. The clerk offers four products in quick succession, the line behind you is growing, and the contract’s fine print does not explain what you already have. The right answer depends on your own auto policy, your credit card and where you are driving, which is why the decision belongs at home, before the trip, not at the counter.
The Four Products at the Counter
Rental companies typically sell four kinds of protection, and it helps to know exactly what each one does:
- Loss damage waiver (LDW) or collision damage waiver (CDW). This is technically a waiver, not insurance. It releases you from responsibility for damage to the rental car, including theft and vandalism.
- Supplemental liability coverage. This covers damages or injuries you cause to other people or their property while driving the rental.
- Personal accident insurance (PAI). This protects you and your passengers against injuries that happen while driving the rental car.
- Personal effects coverage (PEC). This covers personal items stolen from the rental vehicle.
Rental contracts also state what is included and what costs extra. If any of it is unclear, the Triple-I advises having the rental company representative walk you through the agreement before you sign.
What Your Personal Auto Policy Usually Covers
If you own or lease a car, your existing policy is the first place to look. In most cases, whatever auto insurance and deductibles you carry on your own car apply when you rent one, provided the rental is for recreation and not business. Nearly every state requires bodily injury and property damage liability, which pays others when you cause an accident, so that base protection usually travels with you to the rental car.
Collision and comprehensive are the parts that matter most at the counter. Collision pays for damage to the car from a crash, and comprehensive covers theft and related incidents. Both are optional, and many drivers drop them on older cars to save money. If you dropped them, you may not be covered if the rental is stolen or damaged, even though your liability still applies.
A few other policy details shape the decision:
- Your deductible applies. If you use your own policy for a damaged rental, you pay the deductible first.
- Fees may not be covered. Rental agreements can add charges such as administrative fees, loss of use and towing. Check whether your insurer pays for these or offers a rider that does.
- Your belongings are a home policy question. Homeowners or renters insurance, not your car insurance, generally covers possessions damaged or stolen out of a vehicle.
- Medical coverage matters too. Personal injury protection or medical payments coverage on your auto policy reimburses injuries to you and your passengers, and health insurance may cover some costs as well.
One more gap worth knowing about: the Insurance Research Council reports that about one in seven at-fault drivers in a collision is uninsured, and uninsured motorist coverage is not required in every state. State minimum liability limits may also fall short of the costs of a serious accident, which is why insurers often suggest higher limits.
If you do not own a car, you probably have no auto coverage at all, which makes the rental company’s products more relevant. Frequent renters without a car can also ask an insurer about non-owned auto coverage, which applies to vehicles you do not own so you are not buying a fresh policy at every counter.
What a Credit Card Adds, and Primary vs. Secondary
The card you use to pay for the rental may include some coverage as a card benefit, but expect it to be limited. It might, for example, only cover your deductible if you make a claim. More important, this coverage is typically secondary, which means you have to use your own auto insurance policy first and the card picks up only what remains.
Benefits also differ by card. Coverage depends on the company or bank that issues the card and even on the card’s level, so one card in your wallet may include far more protection than another. Rental car purchases, like the authorization holds hotels place on cards at check-in (see Hotel Card Holds and Deposits), are a good reason to know which card to use before you arrive.
The Four Products, Side by Side
Here is how the counter products stack up against coverage you may already have:
| Counter product | What it covers | What you may already have | Who it suits |
|---|---|---|---|
| LDW or CDW | Damage to or theft of the rental car, including vandalism | Collision and comprehensive on your own policy often extend to rentals, subject to your deductible | Drivers without collision or comprehensive, business renters and travelers whose coverage does not apply abroad |
| Supplemental liability | Injuries and property damage you cause while driving the rental | Your policy’s bodily injury and property damage liability usually extends to rentals | Drivers carrying only state-minimum limits who want more protection |
| Personal accident insurance | Injuries to you and your passengers in the rental | Medical payments or personal injury protection on your auto policy, plus health insurance | Travelers with no health insurance and no medical coverage on their auto policy |
| Personal effects coverage | Personal items stolen from the rental car | Homeowners or renters insurance generally covers belongings taken from a vehicle | Travelers with no homeowners or renters policy |
Travel tip
Make the decision before you leave home. Call your insurer and card issuer, take notes on what extends to rentals, and bring those notes to the counter so a sales pitch does not fill the gaps in your memory.
The Gap Abroad: U.S. Coverage Does Not Always Follow You
The protections you rely on in the United States can narrow or disappear at the border. Rental contracts and credit card benefits often carry international restrictions, liability requirements differ from country to country, and your U.S. policy may not extend to a rental driven outside the country. Ask three questions before an international trip: whether your auto policy’s liability applies abroad, whether your card’s rental benefit works at your destination, and what the rental company’s local requirements are. If you are renting on an international trip, the card you pay with matters for other reasons too, which we cover in Paying Abroad: Foreign Transaction Fees, ATM Charges and ‘Pay in Dollars?’.
Medical bills from a crash abroad are a separate problem from car damage. Your health coverage may not follow you, which is where a travel policy can fit in; see Travel Insurance Basics for what those plans do and do not cover.
When Taking the Waiver Is the Safer Call
Declining everything is not always the cheapest choice. Buying at the counter makes sense when:
- You have no auto policy because you do not own a car, since you would otherwise be responsible for all damage to the vehicle.
- You dropped collision and comprehensive on your own car, leaving the rental exposed to theft and damage.
- The rental is for business. Personal policies often limit coverage for business use, and the rules differ, so check with your employer about rental car coverage.
- Your policy excludes charges the rental company will pursue, such as loss of use or administrative fees, and you cannot confirm coverage any other way.
- You are driving abroad and your policy and card both say the trip is not covered.
Questions to Ask Your Insurer Before the Trip
A short call with your agent settles most of this. Ask:
- How much liability, collision and comprehensive coverage do I carry, and does it extend to a rental car?
- If I dropped physical damage coverage on my own car, am I still covered if a rental is stolen or damaged?
- What is my deductible, and can I afford it if the rental is wrecked?
- Does my policy pay for, or offer a rider for, administrative fees, loss of use and towing charges?
- If items are stolen from the rental car, does my homeowners or renters insurance cover the loss, and what does a claim require?
- Does any of this change if I rent outside the United States?
The Insurance Information Institute puts it simply: understand the coverage you are already paying for first, then look at the rental options and skip anything that duplicates it. That phone call takes ten minutes and answers the question the counter clerk cannot.
Before you go
- Your personal auto policy often extends to a rental used for recreation, but only the coverage types you carry, and your deductible applies.
- If you dropped collision or comprehensive coverage on your own car, you may not be covered if the rental is stolen or damaged.
- Credit card rental coverage is usually secondary, which means your own auto insurance is used first, and benefits vary by issuer and card level.
- Homeowners or renters insurance, not car insurance, generally covers belongings stolen from a rental car.
- If you do not own a car or are renting for business, the counter products may be the safer buy; check with your employer for work rentals.
Travelers also ask
Q: Do I need the rental company’s insurance if I have my own auto policy?
A: Often no, because liability, collision and comprehensive coverage on your own policy can extend to a rental used for recreation. Check your deductible and whether the policy covers fees such as loss of use before you decline anything.
Q: What is the difference between a loss damage waiver and insurance?
A: An LDW is technically a waiver, not insurance. It releases you from responsibility for damage to the rental car, including theft and vandalism, and it is sold by the rental company.
Q: Does my credit card cover rental cars automatically?
A: The card you use to rent the car may come with some coverage, but it is typically secondary, meaning your auto insurance is used first. Benefits differ by issuer and even by card level, so confirm before the trip.
Q: What if I don’t own a car and have no auto insurance?
A: Without an auto policy, you would be responsible for damage to the vehicle, so buying coverage from the rental company is often reasonable. If you rent often, ask an insurer about non-owned auto coverage so you are not starting from zero each time.
Fees, processing times and agency rules change, and airline and hotel policies vary. This guide is general information for travelers in the U.S.; confirm the current rules with the agency, airline or hotel before you travel.
