Father and Daughter sitting in trunk of car

Do You Need Rental Car Insurance?

Updated January 3, 2021 . AmFam Team

Deciding if you need rental car coverage depends on your current auto policy. Learn about how full coverage rental car insurance works from American Family.

Say you’re taking that long-anticipated vacation and will be using a rental car to zip around to new and exciting places. Fun!

But when the salesperson at the rental car counter asks you about buying rental car insurance, you might not know what to do. On the one hand, you’ll want to make sure you’ve got the right coverage so you can enjoy your vacation carefree. But you’ll also want to avoid spending your hard-earned cash on car insurance you might already have.

We understand your dilemma, and we’re here to give you the confidence and know-how to make smart choices when it comes to rental cars and insurance.

Rental Car Coverage on a Personal Auto Policy

If you have a personal auto insurance policy, that coverage will most likely extend to your rental car. That means your rental car can be covered by optional auto insurance coverages you may have like collision and comprehensive car insurance, in addition to your bodily injury liability and property damage liability coverage.

If you’re unsure if your personal auto insurance carries over to rental cars, one of the best ways to learn is to reach out to your insurance agent (Opens in a new tab). You’ll save time and money if you know before renting a car whether your personal auto insurance policy actually covers your rental.

Types of Rental Car Insurance

Rental car firms typically offer four insurance coverage options:

  • Liability
  • Personal accident
  • Personal effects
  • Loss damage waiver

If you already have car insurance, it might cover some or all of these options if you’re using the rental car for personal, non-business-related reasons. That’s why it’s important to reach out to your agent (Opens in a new tab) first.

In the meantime, here’s a deeper dive into each of the main four coverage types for rental cars. You’ll also learn the options you should consider to make sure you’re protected, while avoiding duplicating coverage you might already have.

Liability insurance coverage for rental cars

Also known as supplemental liability coverage, liability coverage helps pay for the costs of damage to other cars and property, or injuries to others, if you cause an accident in your rental car.

Liability insurance also is the foundation of personal auto insurance, and most states require every driver to carry it. Although your car insurance policy usually is tied to a specific vehicle, it also can also give you coverage when you drive other vehicles. So, if you already have car insurance, any car you drive is typically covered by your existing liability policy — including a rental car.

You might also receive further coverage on your rental as a benefit from your credit card provider if you pay for the rental with their card. This may or may not include collision and liability coverage, which pays the excess beyond what your personal auto policy covers. So, if you carry a minimum amount of liability insurance, paying with your credit card possibly could add coverage to your existing plan.

Quick takeaway: Do you need rental car liability coverage? Probably not, if you have an existing auto policy.

If you have adequate personal auto insurance liability limits and secondary credit card coverage, the answer is usually, “No.” If you don’t own a car or have minimal auto liability insurance, consider the rental car offer.

Personal accident insurance coverage for rental cars

Personal accident coverage helps pay for the medical costs involved if you or the passengers in your rental car get hurt in a crash.

If you and your passengers are all covered by health insurance, this coverage is probably unnecessary. Medical expenses may also be covered by an inexpensive add-on to your auto policy, so it’s worth talking to your insurance provider if you’re concerned about this type of coverage.

Quick takeaway: Do you need rental car personal accident coverage? Probably not, if you and your passengers already have health insurance or you carry medical expense coverage on your personal auto policy.

Personal effects insurance coverage for rental cars

Personal effects coverage helps pay for the costs of replacing or repairing belongings in your rental car that were stolen or damaged. If you have homeowners or renters insurance, it most likely will cover your stuff if it’s stolen or damaged in your rental car, subject to your deductible.

A smart preventative measure is to remove your things from your rental car when you’re not in it. If you have very valuable items like jewelry, talk to your insurance agent to increase the limits your personal policy will pay if these items are lost or stolen.

Quick takeaway: Do you need rental car personal effects coverage? Probably not, depending on your existing homeowners and rental coverage.

But if you have high deductibles on personal effects losses, weigh the rental car cost for this coverage versus your potential loss.

Loss damage waiver (LDW) for rental cars

Also known as a collision damage waiver, a loss-damage waiver technically is not insurance; it basically gets you off the hook for costs involved if the rental car is stolen or damaged — as long as the damage isn’t caused by speeding, driving on unpaved roads, or other excluded activities in most contracts. It also may cover “loss of use” — which means the loss of income to the rental company — while the rental car is getting repaired.

If you have collision and comprehensive coverage as part of your auto policy, you may not need the loss damage waiver if it’s only limited to paying for repairs, or replacing the rental car if it’s stolen.

If you don’t have collision and comprehensive coverage, check to see if your credit card company would cover the costs of theft or damage.

However, when it comes to loss of use coverage, your auto policy or your credit card might not bail you out. Your insurance provider may challenge these charges by asking the rental car company to prove they had no other rental vehicles available while the vehicle you damaged was out of service. But you may want to consider purchasing the loss damage waiver for extra peace of mind.

Quick takeaway: Do you need a loss damage waiver? It depends.

If you have high collision and comprehensive deductibles on your personal auto policy or no coverage at all, you might opt for the rental car damage waiver. Most policies and credit cards also don’t cover you against loss of use, so a loss damage waiver from the rental company can provide peace of mind that there won’t be any extra charges.

Paying for a Rental Car With a Credit Card

The credit card you use to pay for your rental — and the benefits it provides — can be a determining factor for whether or not you purchase a number of these insurance products. So, it's worthwhile to make a thoughtful decision about how you'll pay for your rental.

In addition to the various card benefits, you should consider the amount of credit available on each card. The reason: In the event there are damages, a rental car company is likely to charge your card immediately — and let the coverage sort itself out later. Choosing a card with less available credit will limit what the rental car agency can charge on it.

Finally, be aware that most credit cards will require you to decline any rental car insurance coverage in order to receive benefits. Consider calling your credit card company to learn more about your coverage and credit limits before traveling, too.

Protect Your Rental Car

Whatever mix of coverage you choose, it’s worth ensuring that the car’s condition is assessed and recorded fairly and accurately before taking ownership of the vehicle. When you go pick it up, take pictures inside and out.

Inspect the vehicle with a rental car employee and be sure the rental agency records all prior damage, including nicks, dents and tears — no matter how small — before leaving the rental agency. If they tell you not to worry about small dings, ask them nicely to please note them on your paperwork anyway. That way you’ll have the paperwork to prove the damage was pre-existing.

Whether you’re off on a big adventure or on your way to relax on the beach, one thing’s for certain: you didn’t travel all that way to talk insurance with the agents at a rental car desk. Spending just a few minutes chatting with your insurance agent before you leave could give you all the information you need to confidently confirm or get extra coverage if needed, and get on with the fun!

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    Do You Need Insurance to Test Drive a Car?

    So, you’re headed to the car dealership to find a new set of wheels — how exciting! You’ve done your research and have a few cars in mind, but you want to make sure your new ride has a good fit and feel. Which means getting behind the wheel for a quick test drive.

    Before you jump into the driver’s seat of that flashy four-wheeled whip, make sure you’re covering your bases: do you need insurance to test drive a car or does the dealership have you covered? Let’s find out.

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    Test Driving a Car at the Dealership

    If you’re at the dealership looking to test drive some cars, you’ll want to ensure you’re covered by insurance if anything unexpected were to happen on the road. Here’s what you need to know:

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    What if I don’t have car insurance?

    The dealership is required by law to insure their cars, which means they should have a blanket policy that pays for damage if a customer is driving the vehicle. So, whether you personally have car insurance or not, the dealer’s insurance should be considered the primary coverage in the event you need to file a claim.

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    What if I have my own car insurance?

    Same answer as above — if you’re test-driving a car, it’s typically the dealership’s responsibility to cover any damages. However, having your own car insurance is always a good idea because there are some instances a dealership could hold you liable (you’ll find out more on that below).

    A good rule of thumb to follow is that the insurance policy usually stays with the car. So, for most states, your personal auto insurance covers your vehicle, and a dealership’s car is covered by their insurance policy — meaning if you get into an accident while test-driving a car at the dealership, it’ll most likely be covered by their insurance.

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    Can the dealer hold me liable for damages?

    All of that being said, while you may be covered under a dealership’s insurance, it doesn’t mean you’ll always get off the hook. Depending on the cause of the accident (reckless driving for example) the dealer might hold you liable for damages. While the dealership may initially pay to repair the car, they could subrogate and try to collect from you or your insurer if you caused an accident during the test drive.

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    What if I sign a waiver?

    There are some dealerships who will ask that you sign a “loaner/demo” agreement before handing over the keys for a test drive. This usually happens when you’ll be driving for an extended time or if the salesperson isn’t present on the test drive. Signing the waiver means you’re accepting liability to pay for the cost of repairs if you cause damage to the vehicle during the test drive.

    Of course, be sure to check with your agent to verify that your personal car insurance policy will cover you in instances like this.

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    What if I’m test-driving a car for sale by a private party?

    Though cars that are sold on the private market are typically covered by standard personal auto insurance, the best thing to do to protect yourself is ask them to call their agent and ensure you’re covered to drive the car.

    You could also ask the owner of the vehicle to sign a statement that gives you permission to drive the car and stating the car is insured. It never hurts to be extra careful in instances like these.

    Keep in mind, if you’re planning on test-driving a car, insurance coverage may be different for each dealership or private party selling the vehicle. Always make sure to discuss with the salesman if you’re covered by their insurance if you were to get into an accident. You can also check with your insurance agent if you’re unsure or have any questions.

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    What do I need to test-drive a car?

    Requirements to test drive a car may vary by dealership and state, but typically you’ll just need to have a valid driver’s license on hand to take it for a spin.

    Our advice to avoid any insurance issues? Be mindful that you’re handling the vehicle with extra care and caution. Familiarize yourself with the vehicle before shifting into gear, set your mirrors to your liking, make sure your feet reach the pedals comfortably, give other cars plenty of space, and, as fun as it is to crank the music, don’t mess with the radio this time around.

    Planning on bringing a car home for good? Here’s a helpful list of what to bring when buying a car — it’s everything you need to make the car buying process smoother.

    Keep in mind, searching for a car is a process that shouldn’t be rushed. Make sure you get out on the road and properly test drive a handful of options. You can also head into the dealership fully prepared with our six tips to make car buying better.

    After you’ve signed the dotted lines and the keys are yours, connect with an American Family Insurance agent to check out our auto coverages to make sure your new ride never goes unprotected.

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    What Happens When a Car is Totaled?

    If you’ve been in an accident and your car takes a serious beating, it may be deemed “totaled” by your insurance company. But what does it actually mean if your car is totaled, and what do you do about it?

    Because you need the right insurance in place before you hit the road, we’re going to review important additional protections that really can make a big difference — like rental car reimbursement coverage. With it, when you’re wondering “is my car totaled?” after an accident, you’ll have some peace of mind knowing you can rent a car and get where you’re going.

    The two types of insurance coverage you’ll want on your car insurance policy — to ensure your vehicle damage is insured — are collision and comprehensive coverage.

    Here’s a detailed breakdown of when a car is considered totaled and what to do if your car is totaled, to help you get back on the road and keep your dreams moving forward.

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    Road Trip Essentials & Checklist

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    How to Prevent Distracted Driving

    Sending a text, eating your burrito, applying makeup — what do all of these tasks have in common?

    They’re all everyday examples of distracted driving.

    As a driver, it’s your responsibility to focus on the road to keep you, your passengers, and other people on the road safe from accidents. We’ve put a spotlight on some risky driving behaviors that we hope can help influence you to keep your focus on the road.

    What is Distracted Driving?

    Distracted driving is when the driver is doing something that takes their attention away from the task of driving. Any time your eyes and/or mind are taken away from the road, you’re technically distracted, which means an increase in the risk of an accident.

    Not all driving distractions are created equal. As you can imagine, some forms of distraction aren’t as dangerous as others. For example, hands-free telephone conversations — although not recommended — isn’t as deadly as other modes of conversation while driving.

    The Deadliest Driving Distraction: Texting and Driving

    It should come as no surprise to you that texting is the most common distraction while driving as well as the most dangerous. It’s so deadly in fact, that it gets its very own section.

    It’s easy for us all to see the dangers of texting while driving, but even with that knowledge, so many of us fall into the temptation of sending off a fast text message while behind the wheel. But even a quick text can have horrible consequences.

    Just think, when you look at your phone, your focus is on the screen, not the road; one hand is off the wheel to hold your device, and your mind drifts to the message instead of the task at hand: driving safely.

    Why texting is distracting

    To put it into perspective, if you’re traveling at 55 MPH and you take your eyes off the road and onto your phone, you’ve traveled about 100 yards – the length of a football field! That’s quite a distance to cover driving “blind.”

    The National Safety Council reports that one out of every four car accidents in the United States is caused by a distracted driver who was texting. They also reported that texting and driving is six times more likely to cause an accident than driving while intoxicated.

    Let these driving facts be a wake-up call to the extreme dangers of texting while driving.

    Is it Illegal to Use Your Phone While Driving?

    The truth is that it depends on which state you live in. As of 2020, the Governors Highway Safety Association reports that there is a hand-held cell phone use ban in 22 states, with 48 states banning text messaging for all drivers. Find out the distracted driving laws for your state to ensure you’re following the rules of the road in your state.

    It’s always important to know our state laws, and in your state there may very well be no law preventing you from texting while driving. However, for your safety as well as those in your car, and for anyone else sharing the roads with you, it’s best to stick with a firm “no phone use while driving” mentality.

    Types of Distracted Driving

    The first step to preventing distracted driving is understanding what it is. In a nutshell, anything that occupies your attention while driving is a distraction. Here are a few notable distractors that should be eliminated while behind the wheel.

    Checking your GPS

    When it comes to directions, we’ve come a long way from the world of fold-up maps. Today, everyone has a built-in navigation system in the palm of their hands: the smartphone. The only problem is that just one quick glance at your phone’s screen is all it takes for a costly mistake behind the wheel.

    Your best bet is to leave your phone in your pocket or purse when driving. But if you must use your phone for directions, enable the voice feature so that you don’t have to look at the screen for every turn.

    Sifting through your music device

    Trying to find the right song for your road trip is just as dangerous as texting and driving. Your best bet is to pick a playlist prior to getting into your vehicle. Or listen to the radio. The key here is to keep your eyes on the road and not on your music device.

    Checking social media

    Instagram, Snapchat, Facebook, Twitter, you name it – all of them bide for our constant attention. Don’t fall prey to this when you’re driving. That post, tweet, or message can wait. Avoid checking social media when behind the wheel.

    Eating behind the wheel

    You may be a pro at eating your burrito on the go, but ingesting your lunch while driving is a big no-no. All it takes is one wayward waffle fry to take your attention from the road to your lap. And it’s not just the mess that distracts; it’s the smell, taste, you name it – that makes eating one of the most distracting things you can do while driving.

    Other types of distracted driving

    There are a few more forms of distracted driving that could cause an accident. If you’re in the driver’s seat, try to avoid these altogether:

    • Taking selfies
    • Talking on the phone
    • Drinking coffee or another beverage
    • Putting on makeup
    • Using an app
    • Loud music

    Top 5 Ways to Prevent Distracted Driving

    There are easy ways to prevent distracted driving. Try using making these five simple changes distracted driving safety tips to have a safer driving experience.

    Use a text-blocking app

    There are many apps available that block texts while driving. Several apps exist with different features, ranging from ones that completely block any incoming or outgoing texts while going a certain speed, to apps that will send a message saying you’re unavailable to respond to an incoming text. Here’s a list from DMV.org with great suggestions for apps to fight distracted driving.

    Have a passenger navigate for you

    If you’re driving with a passenger (of an appropriate age), hand the directions to them. Even a not-so-great navigator in the passenger seat is better than the person behind the wheel being responsible for both driving and navigating. If you’re driving by yourself, take the time to look at the directions before you set off. Then turn the volume up and let the AI lead the way.

    Make music selection easy

    Make multiple playlists that you can choose from before starting the car. If you really need to change it up, either pull over or wait for a red light. Set your presets to stations you already know you like. Hitting one button is better than cranking the dial until you find music you like.

    Don’t text while driving

    If you’re behind the wheel, just put the phone away. Social media can wait. It’s not going anywhere — that we can promise. Are the notifications too tempting? Turn them off! No comment or new tweet is worth the risk.

    Eat at home or while stopped

    If you’re in a rush and want to keep things moving, consider the hazards of driving while eating behind the wheel. Hopefully you can recognize that the risks outweigh the temptation, and you can wait until you get to your destination to eat.


    How Does Distracted Driving Affect Insurance?

    For starters, getting into an at-fault accident will almost always make your insurance premium go up, simply because your insurance company now deems you a higher-risk driver. Distracted driving is no exception. Even if you avoid an accident but you get a ticket for distracted driving, you’re susceptible to those increases in insurance.

    Why does distracted driving increase insurance? For starters, you may be getting a discount for having a clean driving record. But if you get a ticket, such as for texting while driving, you may no longer be eligible for that discount, and you’ll notice an increase in your premium. Another reason your insurance might go up goes back to being a higher risk. If you’re guilty of distracted driving, an insurance company will consider you a high-risk driver (meaning you’re more likely to file a claim due to an accident) and they’ll set your premiums higher.

    Many of the discounts that insurance companies give out revolve around rewarding drivers for having no claims and a good driving record in general. Don’t let distracted driving take away those perks!

    Protect Yourself From Distracted Drivers on the Road

    Avoiding distracting driving behaviors is a great way to be safe on the road, and car insurance is a great way to stay protected from the unexpected. With American Family you can customize your car coverage to meet your unique needs. Talk to your agent today to find the right coverage for you.

    The Insurance Information Institute claims driving while interacting with a mobile device can increase the odds of a crash by as much as 3.5 times, compared to the risks that a sober, alert and attentive driver faces. Teens are more susceptible to collisions, even when speaking hands-free on a mobile phone. Let’s explore the many ways you can help prevent distracted driving accidents.