Rental Car Insurance From Your Credit Card.... I'm going to rent a car when traveling for Thanksgiving. I understand that my c...
I'm going to rent a car when traveling for Thanksgiving. I understand that my credit card will provide rental car insurance. How does this coverage work? --E.S., Hanover, Pennsylvania.
A. Your own auto insurance policy most likely covers rental car damage and liability, up to the same limits as for your own vehicle, and that insurance kicks in first. But your credit card can fill in the gaps, such as the deductible. The coverage varies by card issuer and requires certain steps.
All Visa, Discover and American Express cards and some MasterCards, provide rental car coverage. To qualify, you must reserve the rental car with the same credit card you use to pay for it. You must also decline the rental company's supplemental insurance and collision damage waiver.
The card company may limit coverage to 15 or 31 days, and it may not cover cars rented in certain countries, according to Card Hub, which provides credit card rates and other information. Most card companies don't cover trucks, and American Express doesn't cover some full-size SUVs, such as Chevy Suburbans and Tahoes, GMC Yukons and Ford Expeditions.
During the hot summer season, it's easy to be more concerned with getting a tan than having adequate insurance for your rental car. But not knowing whether your personal auto insurance policy or credit card provides adequate protection can lead you to purchase duplicate coverage or drive off underinsured.
Many people aren't sure how much coverage they already have. About 42 percent of consumers said they were either "thoroughly confused or had only a rough idea about insurance coverage when renting a car," according to a 2007 survey from the National Association of Insurance Commissioners, or NAIC. Of those who held credit cards, around 24 percent said they weren't sure if their credit card provided insurance benefits for car rentals.
To avoid making a costly mistake when you rent a car, research your existing coverage before taking a vacation. Call your insurance agent and the credit card issuer of the card you plan to use. Ask which types of coverage you have and what the limitations are. Benefits can vary among cards from the same issuer, so inquire about your specific card.
Which types of rental car insurance should you worry about?
Types of coverage
Jeanne Salvatore, consumer spokeswoman for the Insurance Information Institute, or III, says there are essentially four types of coverage for rental cars, but two in particular are must-haves.
"The most important coverages are the liability and the collision damage waiver. You don't want to make a mistake with either one of those," she says. If you don't have either coverage through your auto insurance or credit card, it might be wise to purchase them through the rental car agency.
1. Collision damage waiver. The collision damage waiver or loss damage waiver, abbreviated as CDW or LDW, protects the rental car against theft or damage.
"Many credit cards will include some level of collision and theft protection," says NAIC president Jane Cline. To use this benefit from your credit card, you have to use that specific card to charge the rental and decline the CDW or LDW offered by the rental car agency.
Cline warns that in most cases the benefit would be secondary to your personal auto insurance. In other words, secondary coverage would supplement your car insurance, which could lead to increased premiums if you have to file a claim.
Cards that provide primary coverage would shield you from increased premiums with your insurance company. For example, Premium Car Rental Protection from American Express offers primary coverage for theft or damage to the rental vehicle at a flat fee of $24.95 per rental period.
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A CDW or LDW may also include coverage for costs that occur after an accident, such as towing charges, storage and "loss-of-use" fees, which compensate the rental agency for the amount of time that the damaged car is out of service for repair.
Find out from your card company or auto insurer if the CDW or LDW covers such fees and how it verifies them. For example, MasterRental Insurance for World MasterCard cardholders requires the consumer to get a copy of the vehicle rental location or class-specific fleet utilization log from the rental agency.
Many rental agencies offer damage waivers for about $15 to $25 a day, selling peace of mind along with expanded coverage. But these waivers are often no better than the coverage you already have with your favorite credit card.
Depending on where you rent, the rental company’s liability for injury or property damage may be anywhere from $25,000 to $50,000. This could still leave a big bill for you to pay, but your credit card may also step in — sort of. All four major card networks offer rental insurance, but vary substantially in benefits and requirements.
In some cases, car-rental customers may want to purchase full coverage from the car-rental company to avoid the hassle of making a claim or reporting an accident to their primary insurer and the credit card issuer. Make sure you’re comfortable with that process before relying on your credit card’s secondary coverage.
You can also get primary coverage for your car rentals with these two credit cards:
Chase Sapphire Preferred Credit Card
(90)
Learn More
The Chase Sapphire Preferred® is one of the Nerds’ favorite travel cards, so it helps that it offers primary rental car insurance at no extra cost. You’ll earn 2 Ultimate Rewards points per dollar spent on travel and dining and 1 point per dollar spent on everything else. Plus, the card has one of the most valuable sign-up bonuses on the market: Earn 50,000 bonus points when you spend $4,000 on purchases in the first 3 months from account opening. That's $625 in travel when you redeem through Chase Ultimate Rewards®.
It has an Introductory Annual Fee of $0 the first year, then $95 after that, and doesn’t charge a foreign transaction fee.
Chase United Airlines Mileage Plus Credit Card
(31)
Learn More
If you’re a loyal United flyer and often rent cars, the United MileagePlus® Explorer Card might be the right choice for you. It offers 2 miles on every dollar spent on United flights and 1 point on all other purchases, plus a decent sign-up bonus: Start with 30,000 bonus miles after you spend $1,000 on purchases in the first 3 months from account opening.
The United MileagePlus® Explorer Card has a $0 intro annual fee for the first year, then $95 after that, and no foreign transaction fees. You’ll also get your first checked bag fee waived with cardmembership.
What to know about credit card rental coverage
Before we review the rental car insurance benefits offered by each network, you should know that:
Generally, your credit card offers secondary rental insurance. This means that it will only pay for the cost of certain damages not covered by your regular car insurance policy.
As the cardholder, you must book the rental car with your credit card under your name to receive coverage. Only carrying a card that offers rental car insurance isn’t sufficient.
Typically, you must refuse the coverage offered by the rental car agency to receive rental car insurance benefits from your credit card. We’ll discuss exceptions to this general rule below.
This article applies to consumer credit cards. While many business credit cards offer rental car insurance, coverage levels could be substantially different from the benefits described below.
Cards in the same network may have varying levels of coverage. Some issuers don’t offer rental car insurance at all, while others set terms that differ from the network standard. Call your bank or check your card’s benefits statement to learn more about your specific card’s benefits.
Nerd note: Much of the information discussed in this article is a compilation of resources available online. However, some of it was obtained through phone calls to customer service hotlines. It’s important to contact your card’s issuer to verify its coverage policy before you rent a vehicle. Here are some important terms to know before you call:
Loss of use: The cost of renting another car while the original is out of commission.
Fully utilized: Generally, this term describes when 80% of a rental company’s cars are in use. A card network may cover loss of use only if the auto rental company’s fleet is “fully utilized.”
Diminished value: The amount that the rental car’s resale value decreases. This cost is usually relatively small, unless you manage to significantly damage the car without totaling it.
Antique cars: Usually defined as a car made at least 20 years ago or one that has been out of production for 10 years. All networks exclude coverage of such vehicles.
Vans: As a general rule, personal-use vans that seat eight people or fewer are covered. However, some waivers specifically exclude certain SUVs, and almost all exclude cargo vans.
Benefits by network
Visa, MasterCard, American Express and Discover all provide rental car insurance above and beyond what your primary insurer and rental company will offer. Here’s a quick overview of each network’s benefits and limitations:
Visa: Visa is often touted for its excellent rental car insurance benefits, mostly because it’s widely available for cardholders. Unlike many other networks, it offers rental car insurance on all of its cards — standard, Signature, rewards, the works. However, it limits its rental car coverage period to only 15 consecutive days domestically and 31 consecutive days abroad.
MasterCard: Its benefits are similar to Visa’s. However, rental car insurance is not offered on all cards, and it limits its coverage period on all rental cars to 15 consecutive days or fewer. According to customer service, it’s available only on Platinum, Gold, World and World Elite cards.
American Express: American Express is the only network to offer premium coverage for a small fee. It offers free secondary coverage up to $50,000 ($75,000 on The Platinum Card® from American Express and the Delta Reserve Credit Card), but will offer primary coverage with a higher limit and protection against injury and property damage if you choose it.
Discover: Discover’s coverage is limited to a handful of cards. Unlike the other three networks, Discover doesn’t cover loss of use fees, only collision damage up to a $25,000.
Network-by-network comparison
Visa and MasterCard
Both Visa and MasterCard emphasize that their terms vary by issuing bank. Again, check with your particular card’s issuer before renting your vehicle.
