How To Make Smart Decisions About Credit Card Car Rental Insurance

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There’s nothing worse than getting off of an airplane.

You’re tired, and probably in a bit of a mental fog. About a year ago, I got off of a plane, expecting to get on a connecting flight to my destination. I looked at my watch, which indicated that I had arrived at the final destination time. I looked at a guy waking next to me off of the flight.

“This may sound strange, but what city am I in?”

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Turns out that I didn’t have a connection, so I headed for the car rental counter. Now, we’ve all showed up at the counter in that fog and, if you’re like me, you’re always concerned about making a bad decision about insurance coverage on the rental car. If you use a credit card- particularly if you travel frequently- your card may offer some great rental insurance benefits. Forbes recently published a great article on this subject.

Your auto insurance policy

Many of us decline all of the insurance coverages, since we have rental car insurance through our insurance carrier- mine happens to be State Farm. Keep in mind, however, that if you have the opportunity to get rental insurance coverage through your credit card, it can help you avoid filing a claim through your auto insurance carrier, and that keeps your rates lower.

There are several types of coverage that your credit card may offer:

Loss Damage Waiver

A loss damage waiver covers the repair cost of the rental car, in case of an accident. But here’s another potential liability: this waiver also provides coverage for the rental car company’s lost income while their car is being repaired. Your credit card may offer the coverage, but only as secondary insurance, which means that your primary carrier (State Farm, for example) would be the primary insurance policy. Any amount above your auto insurance coverage limits might be covered by the credit card policy.

There are some other exceptions, based on the type of car you rent and if you’re renting overseas. Read the credit card insurance information carefully to find out. Credit card insurance may be useful if your travel frequently. After all, the more time you spend in a rental car, the higher your chances of an accident.

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Personal accident insurance

This policy cover emergency medical and death benefits, and the amounts of coverage can vary widely. This coverage is not typically offered through a credit card, and you should refer to your existing medical, life and other insurance policies for coverage.

Personal effects insurance

You’re probably familiar with this coverage, if you’re ever had anything of value stolen from your car. This coverage is also not covered by most credit card plans, and you should refer to your homeowners or renters insurance policy for coverage.

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Umbrella policy

Regardless of how you use credit card rental coverage, speak with an insurance agent about an umbrella policy. This type of policy kicks in when you reach the dollar limits on other policies, such as homeowners, renters, condo or auto insurance.

As always, these posts are for informational purposes only. Consult a financial, insurance or tax advisor as needed.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies



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Image: Maciej Lewandowski, Vintage Cars, (CC By SA-2.0)

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