When Is It Necessary To Purchase Insurance From a Car Rental Company?

After a year of staying close to home, more Americans this summer are looking for an escape and hitting the open road. For those considering renting a car, whether or not they should opt for the insurance offered by the rental company is a common issue of concern.

Most rental companies offer the following common insurance options:

  • Loss or collision damage waiver in case the rental is stolen, damaged or vandalized.
  • Liability or supplemental liability insurance in the event the driver causes damage to other vehicles or property; this typically includes coverage for medical expenses.
  • Personal accident insurance that pays for medical expenses for both the driver and the passengers.
  • Personal effects coverage for items stolen from or damaged in the rental car.

So, is it absolutely necessary to buy insurance coverage from a rental car company? In many cases, the answer is no. However, there some situations that should be considered. This summer, help your policyholders better understand whether they need the coverage the rental car company is trying to sell them or if their personal auto or homeowners’ policy offers the protection they need.

When insurance follows the driver

In general, auto insurance follows the car. However, when it comes to renting a vehicle, the insurance (depending on the policy) will follow the driver, extending to the rental — just as if the individual were driving his or her own car. As long as a policyholder has liability coverage on his or her vehicle, that protection will transfer to the rental car.

It’s important to remind policyholders that the limits they have on their current personal auto policy are the same limits that will carry over to the rental car. For example, insureds who have a personal auto policy with liability only won’t have comprehensive or collision (full coverage) for damage to the rental. In this case, they should opt for coverage in the event the rental is damaged or stolen. In addition, an insured with low liability limits may want to consider increasing coverage prior to taking a trip or purchasing supplemental liability insurance.

Personal injury protection (PIP) and medical payments (MedPay)

In most cases, it won’t be necessary for insureds with personal auto policies to purchase the rental company’s accident insurance. This is because a personal auto policy with PIP will provide coverage for the driver and passengers for things including medical bills, legal fees, lost wages, etc., if they are involved in a vehicle accident — regardless of fault. MedPay typically only pays for the driver’s injuries and medical bills. However, individuals who don’t have health insurance may want to consider purchasing the accident insurance offered by the rental car company. Why? Because typically, once all other forms of medical payments have been exhausted, a health insurance plan will have the final financial responsibility for treatment related to car accident injuries.  

Traveling with personal items of value

Alert policyholders to the fact that the comprehensive coverage on their personal policy provides coverage only in the event the rental car is stolen, and it won’t cover stolen personal belongings. When traveling with personal items of value or if they just want the additional protection, they should consider coverage for personal effects. However, insureds with a homeowners or a rental policy will have coverage for theft.


It’s always a good idea to regularly review coverages with your policyholders. Consider putting an article in your agency’s newsletter or next email reminding them to give you a call if they have questions regarding rental car coverage so you can review coverages together!

About FastrackCE

Need to complete your insurance continuing education credits this summer? FastrackCE can help you get all your life and health and property and casualty continuing education credits done in one place and at your convenience.

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