What Does Car Rental Insurance Really Cover On Your Credit Card?
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Don't you hate the experience when you are renting a car, and the representative gives you the hard sell on their optional insurance? At that moment, you are pretty sure that your credit card has insurance that will cover your trip, but the sales agents will do their best to sow confusion and doubt in your mind. As a result, many will break down and purchase the over-priced coverage offered by the rental car agency, if only to get on with their trip. (See also: Best Credit Cards to Use While Traveling)
The only way to make this experience less stressful is to understand exactly what your credit card really covers, before you go to pick up your car.
What Credit Card Rental Coverage Is
Technically speaking, the coverage offered by your credit card is not considered to be insurance. Instead, it's referred to as a collision damage waiver policy. This benefit will cover you for damage due to collision or theft, up to the actual cash value of most vehicles, but there are numerous qualifications and restrictions that you need to be aware of.
Activating This Benefit
To use this benefit, you must pay for the entire rental with your eligible credit card, and you must decline all optional coverage offered by the rental car company. While you will be eligible for this coverage if you use a coupon or a discount, free rentals redeemed through a loyalty program will not be eligible, even when you pay for any additional taxes and fees using your credit card.
You should also be aware of the many limitations of this coverage. For example, most credit card policies will exclude a wide variety of non-standard vehicles such as trucks, antiques, and expensive luxury cars. In addition, many credit cards have territorial limitations that exclude vehicles rented in popular tourist destinations such as Italy, Ireland, Israel, Jamaica, and Australia. Finally, the coverage will be invalid if you do anything that violates your rental car agreement. While this includes some obvious prohibitions such as commercial use or illegal activity, you also have to be careful to avoid some other common activities such as driving on unpaved roads, including those made out of dirt or gravel.
What's Not Covered
Even when you have successfully activated your card's collision damage and avoided any excluded vehicles, countries, or activities, you still might not be fully covered by your card's policy. Excluded costs typically include injuries as well as the damage or loss of personal items. In addition, many cards will not cover the rental car company's administrative fees, "loss of use" charges, or the difference between the car's actual value and its replacement value. Sadly, some of these costs can be quite expensive. And finally, many credit card insurance policies are considered secondary, meaning that they only apply to the deductible and other uncovered costs after you have filed a claim with your personal insurance, if it applies. Thankfully, there are some cards offered with primary rental car coverage, which doesn't require you to file a claim on your personal policy.
Recommendations
First, it is important that you do the research and find out how and where your card's policy covers you, and to what extent. And if you have multiple credit cards, you will often find that some offer better coverage than others, so you can choose your cards carefully when you pay for your car rental. To resist the hard sell, state very clearly that you are "declining all optional insurance", and repeat that phrase until they move on.
Finally, you should be aware of American Express's optional premium rental car coverage. This coverage is reasonably priced at $19.95 / $24.95 ($15.95 / $17.95 for CA Residents) per rental period, (not per day). This coverage is primary, excludes fewer vehicles, and has higher limits than the standard coverage.
By understanding the value and the limitations of your credit card's rental car coverage, you can make the right decision the next time you are presented with a choice at the rental car counter.
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