How Does Credit Card Rental Car Insurance Work?

Quick Answer

Many credit cards offer rental car insurance, but the coverage is often secondary to your personal auto policy and it doesn't protect you from all of the potential costs you may incur in the event of an accident.

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Credit card rental car insurance is an alternative to buying the coverage car rental agencies offer when you rent a car. It won't protect you against all of the potential risks if you get in an accident, however.

The coverage it does provide often comes with limitations and restrictions that could limit the benefit's value. Understanding how rental car insurance on your credit card works and the potential advantages and disadvantages can help you determine whether it's a benefit you should take advantage of.

What Is Credit Card Rental Car Insurance?

Many credit cards offer a form of rental car insurance as an ancillary benefit for cardholders. Known as collision damage waiver (CDW) or loss damage waiver (LDW) insurance, you can activate this coverage by paying for the rental car with your credit card and declining the CDW or LDW—or similar provision—offered by the rental agency when you rent a car.

If you get in an accident, the insurance your credit card provides may cover some or all of the costs related to the theft or collision of your rental car. However, this coverage is limited in scope and varies greatly from the coverage you may get from your personal auto insurance policy or even from rental agency insurance.

What Does Credit Card Rental Car Insurance Cover?

Credit card rental car insurance is typically secondary in nature, which means you'll be required to file a claim with your personal policy before the coverage you receive through your credit card kicks in. Your credit card benefit will cover anything your personal policy won't—typically just the deductible.

If you're traveling in another country, don't have a personal auto insurance policy or your card offers primary coverage, your card's coverage will be your primary protection.

Specific terms can vary by card, but here's what you can generally expect credit card rental insurance to cover:

  • Damage to your rental vehicle sustained in a collision
  • Theft of the rental vehicle
  • Loss-of-use charges, or the loss of income for the rental agency while the vehicle is being repaired or replaced

Credit card coverage is good for a rental period of about a month in most countries, but there's a limit to how much coverage you'll get, so you may still be on the hook for some costs if the rental vehicle is more expensive.

What Does Credit Card Rental Car Insurance Not Cover?

The list of what your credit card doesn't cover is typically longer than the list of what it does. Again, terms can vary by card. But, in general, you typically won't get coverage for the following:

  • Personal injuries and property damage you cause in an accident
  • Medical expenses for you and others in your vehicle
  • Loss or theft of your personal belongings
  • Exotic car brands
  • Motorcycles, mopeds, recreational vehicles and large passenger vans
  • Wear and tear
  • Mechanical breakdowns

Credit card issuers may also have limitations related to certain parts and damage or based on the circumstances of the accident.

How Does Credit Card Rental Car Insurance Differ From Your Auto Insurance Policy?

If you have a personal auto insurance policy for your car at home, it'll typically cover rental cars within the U.S. and Canada with the same coverage limits you have on your personal vehicle. The level of coverage you have can vary depending on the policy you've chosen.

In general, though, here are the primary ways credit card rental car insurance and a personal auto insurance policy can differ:

Credit Card Rental Insurance vs. Auto Insurance Coverage
Credit Card Rental Car Insurance Personal Auto Insurance Policy
Coverage types Collision, theft, loss of use Collision, theft, personal injuries, property damage, uninsured or underinsured motorist coverage
Deductible None Up to $2,000
Availability Most countries, with some limitations Typically U.S. and Canada
How to activate Use your credit card to pay, and decline rental car agency coverage Decline rental car agency coverage

While the costs you might incur to repair or replace a rental car are high, they pale in comparison to the expenses you might incur if you cause an accident that results in damage to another vehicle or personal injury to other passengers who may sue you for a variety of damages.

So, regardless of whether or not you use your credit card's CDW coverage, make sure you have liability coverage through your personal policy or the rental agency every time you rent.

Alternatives to Credit Card Rental Car Insurance

While your credit card's CDW coverage can save you some money at the rental counter, you may want to consider other forms of protection instead of or in addition to what your credit card offers.

Personal Auto Insurance Policy

If your credit card's coverage acts as primary coverage, your personal auto policy can provide secondary coverage and provide protection for aspects of a claim that aren't covered by your card.

On the flip side, if your credit card's coverage is secondary in nature, you can use it to cover the deductible required for your personal auto policy's collision or comprehensive coverage when you file a claim.

Homeowners or Renters Insurance

Neither your credit card nor your personal auto policy covers your personal belongings left in a rental vehicle. If you have a homeowners or renters insurance policy, however, your personal effects will be covered, and you won't have to buy that protection from the rental agency.

Health Insurance

If you or someone in your rental vehicle suffers an injury in a collision, you can rely on health insurance coverage to help pay for your medical expenses. That said, you'll still be subject to your health plan's deductibles, coinsurance and coverage limits, so you may still have out-of-pocket costs.

Rental Car Agency's Coverage

Car rental insurance offered by rental agencies can be expensive. But if you're visiting a country where your personal auto policy doesn't work, consider buying the rental agency's liability coverage and injury protection at a very minimum.

Personal effects coverage can also be worthwhile if you plan to leave any of your belongings in the rental car. While buying the rental agency's CDW coverage may not be necessary with your credit card's coverage, it can save you the headache of having to deal with the rental agency and your card's benefits administrator while you're on vacation.

Choose the Right Credit Card for You

While credit card rental car insurance can provide some value, there are many other valuable benefits that credit cards can offer, including rewards, 0% APR promotions, travel perks and more. If you're looking for a new credit card, Experian CreditMatch™ can match you with offers based on your credit profile, so you can compare your options side by side and choose the best fit for you.