Question: I need to rent a car several times a year, but I don’t have my own auto insurance because I don’t own a car. Are there any alternatives to the high-price coverage that the rental car companies offer?
Answer: Cheaper alternatives are out there, but cobbling together sufficient coverage from other sources is tricky and requires more research. It also means more hassle in the event of an accident, if you find yourself coordinating claims between multiple providers.
Even though it’s expensive, “buying from the rental agency is a safe bet if you don’t have coverage elsewhere,” says Penny Gusner, consumer analyst at Insurance.com. But you don’t have to buy everything the rental agent pitches you. Gusner says the two most important types of coverage are supplemental liability, which typically costs an extra $10 to $15 per day, and the collision damage waiver (CDW), which will add $10 to $20 per day to your rate. Supplemental liability covers you for bodily injury and property damage you cause to others, typically up to $1 million. Your rental agency may automatically provide a small amount of liability insurance, depending on state law, but “in many states these limits are low and may not cover you adequately if you’re in an at-fault accident,” she says. Meanwhile, the CDW covers “all kinds of indirect losses that people don’t think about,” says Madelyn Flannagan, vice president of agent development at the Independent Insurance Agents and Brokers of America. The CDW covers damage to the car, charges for loss of use (the daily income the rental company loses while the car is being repaired) and diminished value (the difference in resale value for a car before and after an accident).
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You can probably skip personal accident insurance (as long as you and your passengers have health insurance that would cover injuries in a car accident) and personal effects insurance (which covers stolen valuables, typically at meager limits, and may duplicate coverage already folded into your homeowners or renters insurance policy).
The alternatives to your rental agency’s products may be cheaper, but they won’t be as comprehensive. For example, your credit card might cover physical damage and theft to the rental car, and sometimes loss of use, at no additional charge as long as you pay for the rental with that card and decline the CDW at the rental counter.
There are also independent car-rental-insurance providers that offer CDWs at a lower rate than you can find through your rental agency. If you go that route, Gusner recommends checking the financial ratings of each company’s insurance underwriter through A.M. Best and searching online for the name of the company and “complaints.” You will also want to check coverage limits and whether coverage for loss of use and diminished value is included.
Neither of these options includes liability insurance, so you would still need to get that separately. A non-owner auto insurance policy provides liability coverage, but not all policies extend to rental cars. The premiums may also run several hundred dollars per year, so it only makes sense if you drive cars on a regular basis.
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