What Does Credit Card Rental Insurance Cover?

What Does Credit Card Rental Insurance Cover?

Going away this Memorial Day weekend and renting a car? You can save some money at the car rental counter if the credit card you use to pay for your car rental offers rental car insurance. Most credit cards do. Since car rental agencies charge about $17 to $20 per day for their own CDW (Collision Damage Waiver), you can save a lot of money during a one-week vacation or even a weekend trip.

Rental car insurance isn’t actually “insurance,” (and it doesn’t go by that name) because rental car agencies aren’t licensed to issue insurance. Instead, it’s called “Collision Damage Waiver” (CDW) or “Loss Damage Waiver,” and it basically “waives” the right of the insurance company to force you to pay for damage to the rental car.

Is it really insurance? In that it “insures” you against having to pay for collision damage to the rental car — yes, it is.

Car rental insurance explained
Image: Matt Banks / FreeDigitalPhotos.net

Primary or Secondary Insurance?

Both the rental car agency’s CDW and the insurance through your credit card are forms of secondary insurance. In the event of accident, theft or damage to the vehicle, you’ll still need to make a claim with your insurance company (your “primary” coverage), and your rates could go up.

American Express offers “Premium Rental Car Insurance” to CardMembers. For a fee much lower than the rental car agency’s CDW, you can purchase insurance that takes the place of your personal car insurance as the primary insurance on the rental vehicle.

The Finance Buff blog makes a good point about paying extra to purchase what is, essentially, insurance for your car insurance. He writes: “I am exposed to the risk of having an auto accident every day when I drive my own car. That risk is covered by my own insurance. I don’t see why all of a sudden I want to pay extra to protect my own insurance only when I rent a car.”

As secondary coverage, your credit card rental car insurance will pay the deductible from your primary insurance, as well as any “loss of use” and administrative fees from the rental car agency. However, customers who have attempted to get their credit card issuer to pay these fees have run into difficulties. The rental car agencies are not required by law to disclose documentation regarding loss of use, and the credit card companies won’t pay without that information.

What’s Covered?

In general, your rental car insurance covers:

    • Collision damage
    • Theft*
    • Vandalism, hail, weather, falling objects*

(*except Discover card)

Visa and MasterCard both cover all drivers authorized to drive the rental, while Discover and American Express only cover the driver named on the credit card.

Each credit card company has specific guidelines, which may change periodically. It’s best to call your credit card company’s customer service department, or use online 24/7 customer support, to find out exactly what’s covered and the limits on coverage.

What’s Not Covered?

In most cases, credit card rental insurance won’t cover specialty rental cars, including:

      • trucks
      • luxury sports cars
      • exotic cars
      • vans

Visa’s website specifies they do cover SUVs and most other cars, but you should check with the card issuer before you rent your vehicle. American Express excludes “large SUVs.”MasterCard won’t insure vehicles with an MSRP of more than $50,000, which may exclude some luxury vehicles.

Your rental car insurance won’t cover:

      • theft of personal property
      • normal wear and tear on the vehicle
      • damage caused by off-road driving or driving on unpaved roads (except Discover, which covers all driving)
      • negligence (such as theft if the car was left running with the keys inside
      • liability/personal injury
      • acts of war

If you’re looking to save money on your vacation, you can use your credit card to pay for your rental car and say “No” to coverage at the rental counter. As far as satellite radio and the GPS system for $10 each a day? You’re on your own there.


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