With the summer vacation season upon us, you may soon find yourself standing at a rental-car counter engaged in a potentially awkward conversation about insurance coverage. The rental-car agent may tell you there are two options: full coverage or basic.

As you do the math and realize the cost of your rental car may be about to double, the agent bolsters his pitch by rattling off a series of unfortunate events that would make the insurance a bargain: collision, vandalism, theft — oh my.

The agent speaks in the quick monotone reminiscent of those warnings that are always tacked onto the end of prescription-drug commercials concerning potential side-effects (“may cause your fingers to fall off”). As you start to sweat, you wonder whether there’s time to cancel the resort you booked and go with a budget motel instead to afford the insurance.

All of this could be avoided with a little knowledge gained before your trip. What the agents usually fail to mention is there’s a third option  —  you may already be covered by the insurance you have on a vehicle you own, a credit card, or some combination of both. (However, do not assume that a credit card you own provides rental car protection because it has in the past. Over the last couple of years, several large card issuers have discontinued such coverage.)

What protections do you need?

Here are four types of risk to consider when renting a car, and how to find out if you’re covered.

  1. Your rental car could get damaged or stolen.
    If you have “collision” and “comprehensive” coverage on the vehicle you own, it may apply to a rental vehicle as well. If you can’t bear to read your policy, call your agent and ask. When I did, I was pleased to find that all of the coverage on the vehicles we own would extend to a vehicle we rent. Collision coverage would take care of damage incurred in an accident; comprehensive coverage would take care of theft, fire, vandalism, and weather damage.

    If you don’t have this coverage on your own vehicle (some people drop it when a vehicle gets to be a certain age), see if a credit card you hold provides this coverage. (Keep in mind that any benefit offered by your credit card is only available if you use that card to pay for the rental.) Also, if you do have collision and comprehensive coverage, you probably have a deductible. That may be covered by your credit card, which is a potentially valuable benefit, so check to find out.

    If you don’t have coverage through your own insurance company or a credit card, you’ll want to pay for the rental car company’s “loss-damage waiver” (technically not insurance, but it gets you off the hook if the car is damaged or stolen). If you are an American Express cardholder, a less expensive option would be to buy the company’s Premium Car Rental Protection ($19.95 to $24.95 per rental — not per day — for up to 42 days of coverage).
     
  2. You could damage someone else’s vehicle or property, or injure someone.
    On the policy for the vehicle you own, this is “liability coverage” and the law requires it. Find out if your coverage applies to rental vehicles as well. Also, the state where you are renting a vehicle may require a higher liability amount than you have. If that’s the case, check to be sure your insurance will cover that higher amount. You are probably adequately covered by your own insurance, or by an umbrella liability policy you may own, which would make the rental car company’s “supplemental liability insurance” unnecessary.
     
  3. You or a family member could get hurt in a car accident.
    This is typically covered by the “medical payments coverage” in your own insurance. Anything not covered should be covered by your health insurance. So, you probably don’t need the rental-car company’s “personal accident insurance.”
     
  4. Your belongings could be stolen from the rental vehicle.
    Your homeowner’s insurance probably covers this. A simple call to your insurance agent can confirm that, making the rental-car company’s “personal effects” coverage unnecessary.

Other considerations

  • Collecting on your coverage.
    If you opt-out of the rental car company’s protection because you have coverage through your own vehicle insurance or a credit card, you will probably have to pay the rental car company for any loss and then try to collect from your insurance or credit-card company.
     
  • Primary or secondary.
    Assuming your insurance company and credit cards provide rental-car coverage, it’s important to understand whether they provide primary or secondary coverage. The primary provider is the go-to company for any claims you have to file. A secondary provider may cover costs not covered by the primary provider. If they both provide primary coverage and you have a claim, you can file a claim with either one.
     
  • Loss of use.
    If a car you rent is damaged, the rental company will likely charge a daily “loss of use” rental fee for every day it is being repaired. That can really add up, so find out if your insurance company or credit-card company would cover that cost. In our case, our insurance company does not provide this coverage but one of our credit cards does.
     
  • Uninsured/Underinsured motorist.
    Again, it’s likely this coverage on the vehicle you own will also extend to a vehicle you rent.
     
  • Roadside assistance.
    If you have this coverage through your insurance company, it will likely be in effect for your rental. If you don’t have it, you may want to consider an AAA Motor Club membership. Or, perhaps your credit-card company may offer discounted roadside assistance on a per-use basis.
     
  • Business use.
    If you’re renting a car for business, your personal insurance likely will not cover you. In this situation, you probably will want the rental-car company’s coverage. Ask your employer what to do.
     
  • Other restrictions.
    Some credit cards have restrictions on the types of vehicles they cover. Some don’t cover pick-up trucks, full-size vans or SUVs, or luxury cars. Some may have restrictions as to how many days they will provide coverage. If you are renting a car overseas, your vehicle insurance coverage probably does not apply. Your credit-card company may provide coverage but likely only in certain countries.

Summing up

Before your trip, check with your insurance and credit-card companies to see what rental-car coverage they provide. Assuming it’s adequate, when the rental-car agent presents you with option A or option B, you can confidently, politely decline, explaining that you’re going with option C instead.