Making Use of Credit Card Benefits, Part 1: Rental Car Insurance

You may not know this, but your credit card provides a lot of additional services in addition to letting you postpone payment on purchases and earn cash back or frequent flyer miles. One of these services is rental car collision insurance. Car rental companies will always try to sell you insurance options that can add an extra $30 a day or more to the cost of your rental, but most people don't need to buy this coverage. If you're worried about the liability you take on when you're driving a rental car, read on to learn the important details of the rental car insurance you are eligible for when you pay for a rental car with your credit card.

Discover's travel protection program includes $25,000 in car rental insurance. According to their terms and conditions, if you rent a car for 31 consecutive days or less with your card, pay for the entire rental with your card, and decline the rental car company's loss/damage waiver, you are eligible for the $25,000 in car rental insurance. This insurance applies to collisions only. You must first use your own insurance to cover the accident, and then this secondary coverage kicks in. You probably won't be surprised to learn that Discover's insurance does not cover personal injury (which can very quickly exceed $25,000) or personal liability (which is why it's great to have an umbrella policy), but you may be unpleasantly surprised to learn that this insurance does not cover damage to other vehicles or property -- it only covers damage to the car you have rented. You also must have rented the vehicle in the United States or Canada (and driven within the area allowed by the rental agreement) and it must be a basic vehicle -- no trucks, no antiques, and no high value vehicles are eligible for coverage. If the accident is a result of your being drunk or high, don't expect any coverage, and if you're the only person listed on the rental agreement but your friend drives the car, once again, you're not covered. Impressively, the policy covers your deductible from your primary insurance -- so if you have a $1000 deductible through your policy with State Farm and you get into an accident, you won't be responsible for the first $1,000 worth of damage, Discover will. Discover's policy does not explain whether they will cover you if you do not have your own primary auto insurance, and I was unable to get a response from them on this matter. Discover's insurance coverage is provided by a company called Chubb.

Mastercard's MasterRental program only covers your car if you rent it for 15 consecutive days or less, which is still sufficient to cover most people's vacation rentals, but may not be adequate if you're renting for other reasons (say, because your own car was totaled in an accident). Again, you'll need to pay for the entire rental with your Mastercard and decline the coverage offered by the rental car company. The vehicle must have an MSRP of less than $50,000 and must not be a truck, pickup, sport utility truck, full size van on a truck chassis, camper, antique, offroad vehicle, or other recreational vehicle. MasterRental will cover physical damage to or theft of the vehicle, towing if your vehicle is in a collision, and reasonable loss of use. Again, they expect your primary insurance to pay first, but they will cover your deductible. If you have no other insurance (for example, because you don't own a car), MasterRental will act as your primary form of insurance. So even if you don't have your own insurance, you don't need to buy the rental car company's collision insurance if you're paying with your Mastercard. Keep in mind that Mastercard's insurance does not cover personal injury, personal liability, personal property, medical payments to others, or damage to other vehicles. Unlike Discover, Mastercard's coverage extends to most of the world, with a few exceptions. Overall, it seems to be a more comprehensive policy.

American Express explains their policy fairly clearly on their website, but the kind of coverage you get depends on which American Express card you have (i.e. Green, Platinum, Blue, etc.).
You can read about Visa's coverage here. Since most policies are fairly similar overall, I won't get into an analysis of each major companies policies.

It's important to note that all of these policies have more fine print than I've been able to outline here, and the policies vary slightly from company to company. The overall gist is similar, though: if you're renting an ordinary vehicle for an ordinary purpose and pay for it with your credit card, you'll probably get collision coverage automatically, which means that you can save a good chunk of change by not buying the rental car company's collision damage waiver insurance. Whether you will need the other types of insurance offered (which may include personal accident insurance and supplemental liability insurance) depends on what kind of coverage you already have through your regular car insurance policy or lack thereof. If you have any concerns or unusual circumstances regarding your car rental, read the fine print or call the credit card company with your questions before you rent (and take notes, including the name of the customer service rep). It can be a challenge to track down these policies online, but if you contact your credit card company, they should be able to mail you a copy of the policy.

Car accidents can be very expensive, so it's important to know what you're getting into and make sure you're protected before you rent.

Photo by shrff14

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