When you rent a car in the United States or Canada, your existing auto insurance policy typically extends the same coverage to your rental. That's not usually the case when you're traveling overseas, so it's prudent to look into your insurance needs before you leave home. Your primary choice boils down to the rental company's coverage versus third-party coverage, but there are secondary options as well.
The rental agency's coverage
This is the simple option. Just tick the box on your rental contract, and you're done. Unfortunately, what you get for your money can be highly variable. In Europe, for example, rental agencies are required to have liability coverage on every vehicle. That's already included in the cost of your rental, so you're protected against damage you cause to property or other people. The additional coverage you buy - called the "collision damage waiver," or CDW - protects you against damage to the vehicle itself, or theft of the vehicle. If you can arrange to have a copy of the contract sent to you in advance so you can read it at your leisure, that's great. If not, take time at the rental desk to read it thoroughly, so you understand the limits of the coverage. Deductibles on these policies are often higher than you'd expect, and could lead to large repair bills if you're in an accident. Often there can be additional fees or administrative charges, as well. The agency might offer a "super-CDW" option, with lower deductibles and better terms, but those are costly.
Third-party coverage, as its name suggests, comes from an outside insurance company rather than your rental agency. As with any other insurance purchase, you can shop around and pick out the coverage that suits your needs best. This can give you better coverage than the rental's standard CDW, or a better price, or ideally both. The catch is that you'll need to do your homework. Compare the coverage each company offers and how much the cost varies. Checking the company's claims history online is prudent, too. If you're prepared to do the necessary research, you can potentially save yourself both money and headaches.
Your credit card's supplemental coverage
You may have additional no-cost coverage available through the credit card you use to book the rental. This is complementary coverage, or "second-payer" insurance, which means it's not a straight-up replacement for the CDW. Instead, your credit card company will step up to compensate you for expenses that weren't covered by your base CDW plan, whether it was from the rental company or a third party. Which expenses are covered varies between credit card companies. Learning how they compare is well worth the time you'll spend on the customer service line. For example, you might find that one company covers a rental agency's "administrative fees" while another doesn't. Knowing that can help you decide which card to use while you're away. You'll have to pay these extra costs out of pocket while you're away, but as long as you've documented your expenditures your credit card should reimburse them with little difficulty.
Personal liability isn't usually a major concern, because that coverage is built into your rental, but it's something you might want to think about. The standard coverage is usually whatever local law dictates, and in a worst-case scenario you might find yourself on the hook for any additional liability. The simplest answer to this potential problem is what's called "umbrella liability," an across-the-board form of supplemental coverage. You can purchase it from the same insurer as your home and auto coverage, or as a standalone policy from a different company. Like the supplemental coverage from your credit card, this is a second-payer policy that kicks in after you've reached the limits of your existing liability insurance. It's not a travel product, strictly speaking, but protects you at home or abroad for as long as you keep up the policy.
- Independent Traveler: International Car Rental Tips
- Consumer Reports: Should You Take the Car Rental Insurance?
- Smarter Travel: Third-Party Insurance -- It Works!
- International Risk Management Institute: Insurance Glossary -- Umbrella Liability Policy
- Business Jet Traveler: Money Matters -- The Good News About Umbrella Insurance