You may not need a car for everyday life, but when jetting off to Maui or Milwaukee, a rental car might be essential. But can you rent a car if you don’t have auto insurance? And if you already have insurance, will that policy cover rental car damages and accidents, or do you need to purchase the insurance offered at the counter?
The answers to these questions can be complicated by differences in state laws, rental companies, and coverage policies. Plus, some types of damage may also be covered by other types of insurance, such as health insurance or a homeowners policy.
Insurance Requirements for Renting a Car
Rental agencies insure their own cars, but this doesn’t leave you off the hook—you’re still responsible for damages while renting. So even if the rental agency doesn’t require auto insurance, it’s still a good idea to make sure you have sufficient coverage.
Note that a CDW/LDW policy you purchase through the rental agency may not cover car damage if you violate the agency’s terms, such as racing, driving while drunk, or allowing someone other than the authorized renter to drive the car. Review these terms carefully.
What Your Auto Policy Covers for Rental Cars
Various coverages may be offered by your personal auto policy in addition to coverage provided by policies for renters or homeowners insurance, health insurance, or your employer’s insurance (if you’re traveling on business).
Your auto policy will typically cover your rental car like it covers your own car or truck. However, this also means that if you don’t have collision or comprehensive coverage on your own vehicle, you won’t have it for the rental car, either. You’ll be responsible for any deductibles, just like you would with damage to your own car.
Rental agencies may point out that their damage and theft waivers help you avoid making a claim against your own insurance, which could possibly increase your insurance rates.
While coverage varies by card, the credit card may only reimburse you for damage to the rental car—but not for liability claims made against you by others. Some American Express cards, for example, assist with coverage of your personal property inside the rental car, and for any accidental death or accident-related claims. Other cards specifically exclude coverage of your personal property and any injuries.
To qualify for credit card coverage, the cardholder must use the card to pay for the rental and may also need to decline the rental agency’s coverage, including the collision damage waiver (CDW), personal accident, and property coverage.Credit card coverage is usually secondary, which means it only covers costs after your other coverages have been exhausted—including your auto policy, health insurance policy, or renters insurance. Credit card coverage may pay your deductible, however.
What If You Don’t Have Auto Insurance?
If you don’t have auto insurance, you can still rent a car, but you should decide which coverages to accept or decline at the rental desk. Rental agents should relay that coverage is optional and not a requirement for renting. But here are some coverages to consider:
Liability Coverage and Supplemental Liability Coverage
Liability insurance may be capped at a certain amount, depending on the state and the agency. For example, if you cause $100,000 of injuries to another driver but are only covered for $25,000, you could be financially responsible for the difference. If you don’t have sufficient coverage through a personal auto policy or an umbrella policy, consider purchasing this coverage for your rental.
Damage and Theft Coverage
If you don’t have auto insurance, consider a collision damage waiver or a loss damage waiver from the rental agency. Otherwise, if you’re in an accident or the car is stolen, you carry the full financial responsibility for repairing or replacing the rental car. But check if your credit card provides this coverage first.