How Does Rental Car Insurance Work?

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How does rental car insurance work?

Renting a car can be a great alternative to purchasing one, if you need temporary access to a vehicle or need a specific car to suit your road trip.

If you’ve ever rented a car over the counter, it’s likely you’ve been faced with lots of paperwork. And, as you sign along the dotted lines, there’s no doubt you’re wondering whether or not you actually need to take out the extra cover.

In this article, we’ll answer all of your questions, such as: does car insurance cover rental cars? And how exactly does rental car insurance work?

Read on to find out more.

Rental car companies – What you’re signing?

It’s important to know that rental car insurance isn’t actually a car insurance policy at all. When you’re signing all that paperwork over the counter, you’re likely just signing a collision damage waiver (CDW) – also sometimes known as a loss damage waiver (LDW).

This means that you’re covered if anything happens to the rental vehicle, usually without a deductible.These companies may also offer a liability insurance policy, in addition to the CDW.

Your personal car insurance

Before taking out any new policies or signing any documents, it’s always worth first checking whether your personal car insurance already includes rental car insurance.

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However, this could be limited to certain areas and countries, like the United States and Canada. This might also only cover you when renting certain vehicle types, so it’s always worth checking with your insurer if you’re thinking of renting a car.

Do you need rental car insurance?

Once you’ve considered what your personal car insurance already covers, you can decide whether you want to purchase a CDW or an LDW. This depends on the type of insurance you already have, as if you have liability insurance, for example, then it’s recommended you take out the additional cover for your rental car.

However, if you already have collision and comprehensive cover on your own insurance policy, you probably don’t need to take out any extra, as there’s a chance you’ll just be duplicating your existing coverage.

Despite this, some people still prefer to take out the CWD for extra peace of mind, as your personal car insurance might not cover the rental company’s “loss of use” fee; which will come into effect if you find yourself involved in an accident and have to wait for the car to be repaired.

Always read the rental agreement carefully to make an informed decision.

The benefits of renting a car

Aside from all the paperwork and ensuring you’re covered, there are plenty of reasons why renting a car can be so useful.

You might find you need to rent a car for business needs, so you can easily commute to an important meeting or visit a client. In this case, the company may sort out the coverage you need on your behalf, but it’s always worth double-checking.

You might also want to rent a car for increased safety – as they’re frequently checked, inspected, and serviced. This makes rental cars a great option for traveling long-distances, or road trips if you do not wish to add the mileage onto your own vehicle.

Now you know all the important factors of rental car insurance, as well as whether you might need it or not, you can embark on your next adventures, trusting that you’re fully insured and choosing the safest driving options.

Dylan Miller

I am a Chicago native and regular contributor to "Locar Deals". I have a master's degree in English, am an automobile content creation specialist, and have written professionally for a variety of automotive companies over the past few years. I write on a variety of vehicles, from high-end luxury cars to ten-year-old gas guzzlers and everything in between. And I love sharing valuable car buying tips with consumers from all walks of life.

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