Some of the big credit card issuers are withdrawing the insurance offered on rental cars.
Over the years I’ve been looking at travel, no topic seems to generate more traveler confusion than rental car insurance. So, as a follow-up to my recent rental car update, here’s a closer look at today’s challenges.
What you need. Whenever you drive a rented car, you need two basic types of insurance: collision insurance, which covers your liability for damage done to the car while you’re renting it, and liability insurance, which covers your liability for damage you do to another person or to someone else’s property while you’re driving.
Collision Coverage
What you may already have. Many personal auto insurance policies you have for your own car also include collision coverage for a rented car. But there are gotchas—your regular insurance pays for rental car damage under collision provisions, which usually entail a deductible. In many cases, putting a big rental car damage bill on your regular policy may boost your annual policy cost. Also, if you drive an older car, the maximum dollar limits on your policy may not be high enough to cover a newer, more expensive rental car. And a few personal policies cover rental cars only when you rent a replacement while your personal car is being repaired.Where to get the collision coverage you need. Rental car companies push hard to get you to cover your collision liability by buying the collision damage waiver, or CDW, they sell. And they sell hard, because the cost—these days often north of $20 a day—far exceeds the actual dollar damage risk and instead includes a huge profit. Although lots of folks call it “insurance,” it isn’t; instead, it’s an agreement by the rental company to waive your obligation for damage or loss, subject to a few exclusions. Although vastly overpriced, CDW has the advantage that, in most cases, it gets you off the hook fully and immediately—you just return the damaged car, hand over the keys, and walk away.
Many credit cards offer “free rental car collision protection” as a benefit, but there are gotchas. Most card coverage is secondary, meaning you must first make the maximum payment you can from your regular insurance, and the credit card covers only the difference. Another gotcha is that a few big card-issuing banks—most notably Citi—have quietly stripped most cards of even secondary coverage.
A few cards offer primary coverage—the card pays the entire bill up front, and you don’t have to file a claim on your auto policy. Chase Bank offers the most options, including co-brands with United Airlines, but Capital One, US Bank, and Bilt issue a few.
Overall, inflation has created an insurance gotcha. Most cards exclude expensive rentals, typically any model retailing for more than $75,000. These days, it’s pretty easy to find a higher-priced car on the rental list. Some cards specifically exclude Tesla models. I haven’t seen any blanket exclusion for electric vehicles yet, but it could happen.
If for some reason you can’t accept any credit card gotchas, several third-party outfits sell collision insurance for less than the rental company’s CDW. But two such outfits I’ve previously recommended have changed: Bonzah rates are way up, and Insure My Rental Car is no longer active.
Liability
Whenever you get behind the wheel of any car, you need liability insurance. You need it all the time, not just when renting—and you need a lot more than the minimal state requirement that comes with the base rental. Fortunately, your regular insurance probably covers you in a rented car. And if you have any substantial assets, your best bet is an “umbrella” liability policy offering $1 million and more of coverage.Best Strategy
The easiest way to minimize your collision risk is to buy the overpriced CDW, but the best way to minimize the cost, as well as the risk, is to rent with a credit card offering premium coverage. If you rent often, get a primary-coverage card even if just for rentals. For liability, get an umbrella policy from your year-round auto or home insurance provider.Dear Readers: We would love to hear from you. What topics would you like to read about? Please send your feedback and tips to [email protected] 
