How Do Car Rental Companies Insure Their Cars?

Car rental companies generally provide coverage such as liability, personal accident insurance and Collision Damage Waiver/Loss Damage Waiver for your rental car rental experience. If your credit card offers rental car coverage benefits, check with them or the bank about what coverage may apply in these instances.

If your auto policy includes state minimum liability limits, these will cover any claims brought against you in relation to rental cars.


Car rental companies generate significant revenues by selling consumers additional insurance policies at the counter, typically offering four types of coverage: collision damage waiver, supplemental liability protection, personal accident insurance and personal effects coverage. Each of these coverage options can cost an extra $30 daily depending on which plan they select – but are they worth it?

First and foremost, know that having auto insurance covers most things for rental cars. Your liability coverage (up to your policy limits) typically extends to include rental car coverage; comprehensive and collision policies often also offer rental car protection with some deductible payments required before coverage kicks in.

If your car insurance policy includes rental coverage, be sure to bring both your ID card and rental agreement when renting a vehicle. This will demonstrate to the rental company that your personal policy covers what they’re renting out — giving you confidence when dealing with counter salesperson pressure to purchase additional coverage from them.

Consider that if you own a credit card with an excellent travel benefits program, you may already be fully covered for your rental car needs. Many major cards offer rental car coverage as part of their premium card membership – usually both domestic and international rentals alike are covered excluding trucks or other speciality vehicles – check your card company’s travel benefits website to see if their coverage applies before booking any rental.

At times, some may opt to purchase the optional personal accident and/or loss damage waiver coverage from their car rental company because it can offer higher limits than their auto policy. This can be particularly important when traveling with high-value items that might be at risk from theft or accident damage, or when considering medical expense and death benefits as they could provide more peace of mind than just standard coverage alone.

Third-Party Liability

Third-party liability coverage provides car rental protection from claims by other people in an accident you cause, such as damage to their cars, passengers and property in an incident that you cause. This coverage type is one of the most frequently offered by car rental companies and may vary slightly between countries and coverage levels; but overall it should provide similar protection. Your personal auto policy should already cover this scenario provided the minimum legal requirements are met; to find out exactly what’s covered within that policy or whether a separate one may be needed, consult its terms to discover exactly what coverage exists and whether additional car rental coverage may be needed or not.

Car rental businesses require general business insurance policies that cover vehicles owned by the business, while national chains may opt for umbrella policies to cover all their fleets at once – as it would cost significantly more to insure each individual car individually, plus it would be difficult and time-consuming managing separate policies for every vehicle in and out of ownership of their fleets.

Excess liability insurance supplements a regular business policy to increase coverage limits and is therefore an integral part of every successful company, including rental car companies. Rental car companies in particular should carry excess liability policies because their vehicles are constantly at risk from damage.

Collision and comprehensive insurances are two other major coverages offered by rental car companies. They cover the costs associated with repairing or replacing rental cars if they are involved in an accident or by an incident other than an accident, such as vandalism. Unfortunately, most personal auto policies don’t cover such circumstances, making these policies quite costly if needed.

Your best bet for car rental insurance is to inform your personal auto insurer of your plans to rent, and add rental coverage onto their policy. If this doesn’t cover rentals, third-party or credit card coverage might provide adequate protection – or simply at the counter itself may offer coverage as an add-on option; just make sure that any extra cost is worth paying in relation to your specific circumstances.

Collision Damage Waiver

Having collision and comprehensive car insurance on your personal vehicle might make you assume that its coverage extends to rental cars as well. But before renting any cars, be sure to discuss this matter with your agent as there may be specific exclusions that need to be addressed.

At the rental car counter, salespersons may try to convince you to purchase CDW (or loss damage waiver). They might try to convince you how costly repairs or replacement could be in case of an accident; but in reality, your personal auto policy likely provides similar coverage.

When your salesperson tells you about your credit card’s collision protection feature, you can confidently decline their CDW offer. Most major cards provide secondary collision coverage that becomes primary if no other source provides it such as auto or travel policies or homeowners/renters policies covering stolen/damaged rental car personal effects coverage is in place; otherwise personal effects coverage from either your credit card provider or insurer could suffice as enough protection without needing an upgrade to CDW coverage.

Collision Damage Waivers can range in cost from being an additional $1 to almost doubling the daily rate for rental car. Economy vehicle rates generally run $10-30/day with 25%-40% being applied towards their base rental fee.

In some instances, rental car companies will still charge you a deductible fee and possibly additional charges for lost revenue while your vehicle is out of service. Such costs typically appear within the rental agreement.

Simply stated, CDW should be avoided as it’s not real insurance and can take advantage of unknowing consumers without providing adequate protection through other sources. Before renting any vehicle consult your agent about whether your personal auto policy extends to rentals as well as what any stipulations might exist for each policy that covers rentals.

Loss Damage Waiver

Car rental companies typically provide drivers renting from their fleet with various insurance policies, the most popular of which being collision damage waiver, also known as loss damage waiver (LDW). This policy alleviates renter financial responsibility in case of an accident or theft and may be an attractive choice for those without comprehensive or collision coverage on their personal auto policy or who don’t wish to pay expensive deductibles on separate policies when renting cars; however there are important things to keep in mind before purchasing one of these waivers.

CDW/LDW services may be profitable for car rental companies, but may not always benefit the customers who rent vehicles. In many instances, purchasing this form of waiver may cost more than buying their own coverage for that vehicle and will not protect you in case an accident happens in which you were found responsible or violate the terms of your rental agreement in any way.

CDW/LDW policies don’t typically cover expenses like towing charges, diminished value assessments or administrative fees associated with filing an insurance claim – expenses which can quickly add up and often prove more costly than renting the vehicle itself.

As car rental companies strive to maximize profits, it is crucial for them to thoroughly consider all risks and benefits of their various insurance options. Customers must understand what CDWs and LDWs mean so they can make an informed decision about purchasing or declining them – this will reduce confusion as well as fraudulent claims to both parties involved.