ou are standing at the rental car counter to rent a car, and the agent asks you if you would like to sign up for the agency's car rental insurance or not. Now, you are in a dilemma. The insurance is pricey, but the liability after the accident is even pricier. Fortunately, your credit card provides the same coverage for free. Conventional wisdom is that a credit card can either fully or partially cover an auto rental's insurance, thus negating the need to get coverage from the auto rental provider and saving you the money and the risk.
However, before you decline coverage, you should understand what credit cards cover, how extensive the coverage is and what they don't cover.
What is Auto Rental Insurance Coverage?
Auto rental insurance coverage is similar to auto insurance. The only difference here is that the coverage protects you from the liability incurred due to accidents involving rental cars. For instance, you rented a car and went for a long drive on vacation. Accidents can happen anytime; unfortunately, you crashed into a tree and severely damaged the vehicle. This is even worse than crashing your car as it is not your own car. It's someone else's, and you have to pay compensation for it. This unexpected payment could empty your pocket if it were not for auto rental insurance coverage which takes care of the payout on your behalf.
What Does Credit Card Auto Rental Insurance Cover?
Collision Damage Coverage
When you damage a rental car in an accident, you are liable to pay for all the damages incurred and the loss that the rental company has to face due to the damage. You must additionally pay for the potential revenue the company would have generated from the car that you damaged until it is fully repaired. Well, that's a whole lot of money.
Fortunately, most credit cards cover auto rental insurance and any collision damage. This limits how much you can be charged for the damage to the car. You might need to pay a few bucks out of your pocket or none; it depends on your credit card and the damage you have done to the car.
Types of Credit Card Auto Rental Insurance Coverage
The credit card usually provides secondary coverage, which kicks in after your personal car insurance policy. When an accident happens, firstly, you need to report it to your personal insurance policy, and the card company will pay you any extra money not covered by the policy.
Some credit card companies provide primary coverage. You can claim to the credit card company directly after the accident. This does not require additional insurance coverage, and you may not have to pay the deductible on your insurance policy.
What Doesn't Credit Card Auto Rental Insurance Cover?
Though it seems incredible to use credit card auto rental insurance coverage, it has some limitations. Your credit card does not cover everything. Here's what your credit card does not cover :
Liability Coverage pays for the property damage/ injuries caused due to the accident. It can be broken into two parts: Bodily injury and property damage coverage. Bodily injury coverage covers the medical bills and compensation for the party injured in the accident. Likewise, property damage coverage covers the repair or replacement of the other vehicles or property damage. For instance, if you crash into a mailbox with your rental car, the insurance will cover the compensation fees required for repair or replacement.
Unfortunately, the credit card does not cover the liability coverage. However, if you have primary auto insurance, you are already covered. Things can be tricky if you do not have any insurance. In such cases, you can purchase the coverage from a car rental company which might cost around $15 a day, or consider an umbrella liability insurance policy.
Personal Accident Insurance
If you are injured in an accident in a rental car, the credit card won't cover the hospital bills for you and your passengers. You would need to file a claim separately to your health insurance.
Personal Effects Insurance
Your personal belongings, such as a laptop, phone, or bag, might get stolen from the rental car. In such cases, credit card insurance won't cover the compensation. You must file a claim for your home or renter's insurance policy.
There are terms and conditions for your auto rental insurance coverage with credit cards. It specifies which rental cars are covered and which are not. Usually, the expensive and luxurious cars are not covered. Thus, choosing the insurance policy from the rental counter is better if you rent costly vehicles.
Long Rental Period
Credit cards typically cover short-term rentals, such as a few weeks up to a month. It does not provide coverage for extended rental periods.
Some credit cards have domestic and international coverage. It all depends on the card's terms and conditions on which countries they cover and don't cover. Usually, this coverage is excluded as per the law in those countries. Most cards do not provide insurance coverage in Australia, Italy, or New Zealand. However, it depends on the card's policy, and you can ask them if your travel destination is covered or not.
Which Credit Cards Are Best For Auto Insurance Coverage?
Credit cards offering primary coverage are best for auto insurance as you can directly file a claim to the credit card company after an accident. Filing a claim does not impact your other insurance policy, and you do not need to pay a higher premium. Likewise, secondary coverage credit cards are not preferable as they only pay you the amount your insurance policy did not. This impacts your insurance premiums; the coverage is just there as a back plan. It only ensures you don't have to pay the compensation out of pocket.
However, most credit cards offer secondary coverage. Thus, secondary coverage can still be valuable if you cannot get a primary coverage credit card. But, make sure you opt for a primary coverage credit card when applying.
How To Get The Most Out Of Your Credit Card For Coverage When Renting A Vehicle?
To get the most of your credit card coverage while renting a car, keep the following points in mind:
- When renting the vehicle, you must pay the total rental cost plus fees with a credit card.
- The cardholder must be the primary renter.
- It would help if you opted out of the car rental's Collision Damage Waiver Coverage. The credit card insurance won't pay you if you already have CDW from the car rentals.
- Make sure you have contacted your credit card company to know in detail if your rental car and rental destination are covered or not.
- The credit card covers for one month at maximum, which might be equivalent to the cash value of the rented car or as mentioned in the terms.
- If you do not have auto insurance, even if your card has secondary coverage, it offers benefits of primary coverage for the collision damage waiver.
- If your auto policy does not cover you outside of the US, the card offers primary coverage even if the card has secondary coverage.
What Are The Steps To Make A Claim?
The steps to make a claim differ according to the credit cards. However, these are general steps you can take to make a claim :
- Call your credit card company to report the incident and get a claim form.
- Provide proof of document (car rental receipt, police report, driver's license, and photos of damage)
- Submit the form and documents within the time frame
What Are Common Mistakes That You Should Avoid?
Here are some common mistakes that you should avoid while using the auto rental insurance coverage credit cards:
- Not all credit cards may have auto rental insurance coverage. So, make sure to ask your credit card company if this benefit is included or not.
- Credit card rental insurance does not cover liability and personal injury. Thus, credit card insurance is preferable only if you have auto and other insurance to back it up. It is reasonable to opt for counter rental insurance if you do not have insurance.
- If you plan to go for a long trip, make sure to call your credit card company to know the maximum length of time you can rent a car and get covered.
- The credit card does not cover all countries. So, you must verify from the credit card company if the place you are visiting is a covered country or not.
- Credit card insurance does not cover every car. The expensive and luxurious cars are not covered. Thus, you must call the credit card company before the exact specifics of what cars are and are not covered.
- The credit card company does not cover the rental car for commercial purposes. Thus, if you rent the vehicle for that purpose, you must opt for rental insurance.
- Most credit cards require you to file a claim with your primary insurance provider leading to an increase in the premium. It only covers the gaps afterward. So, it's beneficial to get a credit card with primary coverage so that the credit card covers the entire accident, and your insurance company would not have to know.
Auto rental insurance coverage with credit cards helps save extra fees you would have had to pay otherwise to get the same coverage. However, it is crucial to understand if your credit card has that added benefit, what it covers and what it does not. It's always better to call your credit card company beforehand to inquire if your credit card covers you or not. This helps you make an informed decision to either opt for the coverage offered by a rental car company or not.