Rental Car Insurance: Types, Coverage, and Recommendations

When looking at the different options for car rental insurance in the United States, you will generally run into five options. These are Loss Damage Waivers (LDW) which are also commonly referred to as Collision Damage Waivers (CDW). There is also Liability Insurance Supplement (LIS), Personal Accident Insurance (PAI), and UMP, which is Un- and Underinsured Motorist Protection. The fifth option is to not take any rental insurance at all, but we’ll get back to that one later.

LDW/CDW takes care of pretty much everything. It takes care of your own risks, plus if the car is stolen or damaged, then Loss Damage Waivers will cover the entire cost. This is by far and away the best insurance for car rentals as far as coverage goes—but the price reflects it. Many places charge $20-30 per day for this type of insurance, which means even a single week can cost you an additional $210. This insurance can be, and often is, even higher if you rent a full-sized or luxury vehicle.

Liability Insurance Supplement is often in addition to whatever other insurance you purchase. LIS covers you for the costs of any damage or injuries that are a direct result of an accident you are involved in. LIS is usually much cheaper than LDW/CDW, but this may still cost you $8 a day and it adds up, though there is a definite degree of reassurance from knowing you are covered.

The two other insurances that are generally offered are Personal Accident Insurance and Uninsured Motorist Protection. While both of these may seem appealing at first glance because of cheaper prices, don’t be fooled. There is almost never a situation where you actually need one of these. If you’re going to buy insurance for a rental car, then buy the larger policies that are more inclusive. Saving $5 a day won’t help if you get into an uncovered accident.

Then there was the fifth option: not buying any. Insurance is expensive, so it is important to see if this actually is an option for you. Some car insurance policies automatically cover rental cars, which makes any rental insurance both superfluous and fiscally unsound. Also see your credit card company’s policies. Some of the more respectable credit cards have a policy to automatically cover you as long as you put the rental on that card. If either of this cover you, that is a much better route to go than rental insurance from the agency itself.

All of that being said, make sure that you are not under insured. Otherwise if you are involved in an accident you might end up paying for any damages you shouldn’t have to pay for. Always check each insurance policy for coverage and cost, and make sure the first makes it worth the latter.