Here's the thing that catches most people off guard when they're standing at the rental car counter: the insurance question. The agent asks if you want coverage, rattles off acronyms like CDW and LDW, and suddenly you're doing mental math trying to figure out if you're already covered. You probably are—but the answer isn't as simple as yes or no.
Most renters have at least two layers of coverage already in place: their personal auto insurance and their credit card benefits. Yet rental companies still sell billions in supplemental insurance each year. Why? Because the coverage landscape is confusing, and the stakes feel high when you're about to drive off in someone else's car. Let's cut through the confusion and figure out exactly what coverage you need—and what you're probably already paying for.
Your Personal Auto Policy: The Foundation
If you own a car and carry auto insurance, that coverage typically extends to rental cars—but with the same limits and deductibles you have on your personal vehicle. This means if you have comprehensive and collision coverage with a $1,000 deductible, that same deductible applies when you're driving a rental. Your liability coverage extends too, which is crucial because that protects you if you damage someone else's property or injure another person.
Here's what usually transfers from your personal policy: liability coverage (bodily injury and property damage), comprehensive coverage (theft, vandalism, weather damage), collision coverage (accident damage), and medical payments coverage if you have it. The same coverage limits apply—so if you carry $100,000 in liability coverage, that's what you get with the rental too.
But there's a catch most people don't think about: rental car companies often charge additional fees beyond repair costs. You might face charges for loss of use (compensation for the days they can't rent the car while it's being repaired), diminished value (the reduction in the car's resale value after an accident), and administrative fees. Your personal auto policy typically doesn't cover these extras, which can add up to hundreds or even thousands of dollars.
Also important: if your personal policy doesn't cover business use, you won't be covered if you're renting for a work trip. And if you don't carry comprehensive and collision coverage on your own car—maybe you drive an older vehicle and dropped that coverage to save money—you won't have it on the rental either.
Credit Card Coverage: Your Second Line of Defense
Many credit cards offer rental car coverage as a perk—but you need to understand exactly how it works before you rely on it. First, the coverage only applies if you pay for the entire rental with that card and decline the rental company's collision damage waiver. Second, most credit card coverage is secondary, meaning it kicks in only after your personal auto insurance pays out. A few premium cards offer primary coverage, which applies before your personal policy.
What credit card coverage typically includes: collision damage (if you hit something or get hit), theft (if the car is stolen), towing charges, and loss-of-use fees. The Chase Sapphire Reserve, for example, offers primary coverage up to $75,000 for rentals up to 31 days domestically. Most other cards cap coverage at 15 days in the U.S. and may extend to 31 days internationally.
Here's the critical limitation: credit card rental coverage almost never includes liability insurance. If you cause an accident that damages another vehicle or injures someone, your credit card won't help. You need your personal auto policy for that. Also, credit cards typically exclude certain vehicle types—exotic cars, large vans, trucks, and sometimes luxury SUVs aren't covered. Always check your specific card's terms before assuming you're protected.
Not all cards offer this benefit anymore. Discover dropped rental car insurance coverage, and Citi eliminated it from most of their cards. Before your next rental, call the number on the back of your card or check the benefits guide to confirm you actually have coverage and understand what's included.
Rental Company Insurance: Understanding Your Options
When you rent a car, the company will offer several insurance products, usually at the counter right when you're tired from traveling and just want to get on the road. The main one is the Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)—rental companies use these terms interchangeably, though LDW technically includes theft protection while CDW may not.
A CDW or LDW costs anywhere from $15 to $45 per day depending on the rental company, vehicle class, and location. It eliminates your financial responsibility for damage to or theft of the rental car. No deductible, no waiting for insurance claims, no rate increase on your personal policy. If something happens to the car, you walk away. For a week-long rental, you're looking at an extra $105 to $315—which can nearly double the cost of an economy car rental.
But even CDW isn't always zero-deductible. Many rental companies maintain deductibles of $1,000 to $1,500 or more unless you buy "super CDW" or "zero-deductible coverage" for an additional $10 to $30 per day. That's when the costs really stack up—you could be paying $55 to $75 per day for full coverage with no deductible.
Other options you'll see: Liability Insurance Supplement (LIS) for $10 to $15 per day, which provides additional liability coverage beyond what the rental company carries; Personal Accident Insurance (PAI) for $6 to $10 per day, covering medical costs for you and your passengers; and Personal Effects Coverage (PEC) for similar pricing, which covers theft of your belongings from the car. If you have health insurance and homeowners or renters insurance, you probably don't need PAI or PEC.
When Rental Company Insurance Actually Makes Sense
Despite having coverage through your personal policy or credit card, there are situations where buying rental company insurance is the smart move. If you don't own a car and therefore don't have personal auto insurance, you need coverage—period. The rental company's insurance is your only option unless you buy a non-owner auto insurance policy, which provides liability coverage but not collision or comprehensive.
If you're renting a luxury, exotic, or specialty vehicle, your credit card probably won't cover it, and you might not want to risk a claim on your personal policy. A CDW gives you peace of mind. Same thing if you're renting in a country where you're unfamiliar with driving conditions or local insurance requirements—buying the rental company's coverage can save you from navigating foreign insurance systems if something goes wrong.
Another reason: avoiding a claim on your personal policy. Even though you have coverage, filing a claim can raise your rates for years. If you have a high deductible—say $1,000 or more—and you're renting a newer, expensive vehicle, paying $25 per day for CDW might be cheaper than paying your deductible plus dealing with potential rate increases. According to Consumer Reports, only 10% of renters actually buy insurance from rental companies, but those who do often have good reasons.
How to Make the Right Decision for Your Situation
Before your next rental, take these steps. First, call your auto insurance agent and ask specifically: Does my policy cover rental cars? What are my coverage limits and deductibles? Does it cover rentals for business use? Are there restrictions on vehicle types or rental duration? Get clear answers, not assumptions.
Second, check your credit card benefits. Read the actual coverage document—don't rely on marketing materials. Note whether it's primary or secondary coverage, what the coverage limits are, how many days are covered, and what vehicle types are excluded. Know that coverage typically only applies if you pay the full rental cost with that card.
Third, do the math. Calculate what you'd pay out of pocket with your existing coverage (your deductible plus potential loss-of-use fees) versus the cost of rental company insurance for the duration of your rental. Factor in the hassle and potential rate increases from filing a claim on your personal policy. Sometimes paying $150 for a week of CDW is cheaper and easier than dealing with a $1,000 deductible and insurance claims.
Finally, consider your comfort level with risk. If declining coverage will make you anxious the entire trip, that stress might not be worth the savings. On the other hand, if you have solid coverage through your personal policy and credit card, understand exactly what's covered, and feel confident in your driving, you can comfortably decline the rental company's pitch and save hundreds of dollars.
The rental car counter doesn't have to be a moment of uncertainty. Armed with knowledge about what your personal policy and credit card actually cover—and what they don't—you can make an informed decision that protects you without paying for redundant coverage. Take the time to understand your existing protection before your trip, and you'll breeze through that rental counter with confidence.
