Do I Need Insurance to Drive a Rental Car?

Do You Legally Need Rental Car Insurance?

Yes, you legally need liability insurance to drive a rental car, but you don't need to buy it from the rental company.

Legal requirements:

1. Liability coverage is mandatory • Every state requires minimum liability insurance • Covers injuries and property damage you cause to others • Rental companies verify you have insurance or offer to sell you coverage

2. Physical damage coverage is optional • Not legally required • Protects the rental vehicle itself • Your choice whether to carry it (or buy from rental company)

How rental companies handle insurance:

• They ask if you have insurance
• If yes: Your policy extends to the rental (they verify or take your word)
• If no: You must purchase their liability insurance to rent the vehicle

Can you rent without insurance?

No, not legally. Rental companies require proof of insurance or require you to purchase their coverage. Some exceptions: • Credit card coverage (liability, not just collision) • Non-owner insurance policies • Commercial rental agreements with fleet coverage

Penalties for driving uninsured:

If you decline rental insurance and don't have personal coverage: • Illegal in all states • Fines: $100–$5,000+ (varies by state) • License suspension • Vehicle impoundment • Personal liability for any accidents

Bottom line:

You need insurance, but you likely already have it through your personal auto policy. Understanding what's covered helps you avoid buying unnecessary rental company insurance.

For more on coverage types, see our guide on types of car insurance coverage.

Does Your Personal Auto Insurance Cover Rental Cars?

Most personal auto insurance policies extend coverage to rental cars, but limitations apply.

What typically transfers to rentals:

1. Liability coverage • Covers injuries and property damage you cause • Same limits as your personal policy (e.g., 100/300/100) • Applies in the U.S. and Canada (usually excludes other countries)

2. Collision coverage • If you have it on your personal vehicle, it extends to rentals • Covers damage to the rental car in accidents • Your deductible applies ($500, $1,000, etc.) • Repairs or total loss covered up to rental vehicle's value

3. Comprehensive coverage • If you have it on your personal vehicle, it extends to rentals • Covers theft, vandalism, weather damage, fire • Your deductible applies • Same limits as your personal policy

4. Medical payments (MedPay) or personal injury protection (PIP) • Covers your and passengers' medical bills • Extends to rental vehicles if you carry it

What usually does NOT transfer:

✗ Rental reimbursement: Ironically, rental reimbursement on your policy doesn't cover you renting a car (it covers renting while your car is being repaired) ✗ Loss of use charges: Rental companies charge for days the vehicle is out of service; some policies exclude this ✗ Diminished value: Rental companies may bill for reduced resale value after repairs; personal policies rarely cover this ✗ Administrative fees: Rental companies charge processing fees; not covered by personal policies

Verifying your coverage:

Before declining rental insurance:

• 1. Call your insurer
• Confirm rental coverage
• Ask about deductibles and limits
• Clarify exclusions (exotic cars, international travel, etc.)

• 2. Review your policy declarations page
• Check for collision and comprehensive coverage
• Note your deductibles

• 3. Understand geographic limits
• U.S. and Canada usually covered
• Mexico and international destinations typically excluded

Example:

You rent a car with your 100/300/100 liability, $500 collision deductible, and comprehensive coverage.

• Covered: Liability for accidents, collision damage (minus $500 deductible), theft, vandalism
• Not covered: Loss of use fees, diminished value, administrative charges

For more on how your policy works, see what does car insurance cover.

Credit Card Rental Car Insurance: How It Works

Many credit cards provide secondary collision coverage for rental cars—but important limitations apply.

What credit card insurance typically covers:

1. Collision damage (physical damage to rental vehicle) • Covers repair costs or total loss • Includes theft in most cases • Usually secondary (after your personal insurance) • Some premium cards offer primary coverage

2. Coverage limits • Usually up to actual cash value of the rental • Some cards cap at $50,000–$75,000 • Luxury and exotic vehicles often excluded

What credit card insurance does NOT cover:

✗ Liability: Does not cover injuries or property damage to others ✗ Personal injury: Does not cover your medical bills ✗ Personal belongings: Does not cover stolen items from the rental ✗ Loss of use: Rarely covers rental company's loss of income ✗ Administrative fees: Often excludes processing charges

Primary vs. secondary coverage:

• Secondary (most cards): Pays after your personal insurance. Your insurer pays first, credit card covers deductible and excess costs.
• Primary (premium cards): Pays first, before your personal insurance. Avoids filing a claim on your policy.

Requirements to activate coverage:

• 1. Pay for the rental with that credit card
• Full rental cost must be charged to the card
• Splitting payment may void coverage

• 2. Decline rental company's collision damage waiver (CDW/LDW)
• If you buy CDW, credit card coverage is void

• 3. Rent from covered rental company
• Major agencies covered (Hertz, Enterprise, Budget, etc.)
• Peer-to-peer rentals (Turo) often excluded

• 4. Rental duration limits
• Usually 15–31 days maximum
• Extended rentals may not be covered

• 5. Geographic restrictions
• U.S. and many international destinations covered
• Check your card's policy for specific countries

Common exclusions:

✗ Trucks, cargo vans, RVs, motorcycles ✗ Luxury brands (Ferrari, Lamborghini, Rolls-Royce) ✗ Vehicles over a certain value ($75,000+ on many cards) ✗ Off-road use ✗ Renting for business purposes (some cards)

Which cards offer primary coverage:

• Chase Sapphire Reserve
• American Express Premium Cards (Platinum, Business Platinum)
• Certain World Elite Mastercard products

Bottom line:

Credit card coverage is a valuable backup but does NOT replace liability insurance. You still need personal auto insurance or rental company liability coverage.

For more on coverage essentials, read types of car insurance coverage.

Rental Company Insurance Options Explained

Rental companies offer four main types of coverage—understanding each helps you decide what's necessary.

1. Collision Damage Waiver (CDW) / Loss Damage Waiver (LDW)

• What it covers: Damage to the rental vehicle (collision, theft, vandalism)
• Cost: $15–$30 per day
• How it works: Rental company waives your financial responsibility for vehicle damage
• Deductible: Usually none (zero out-of-pocket)
• When to buy: You don't have collision/comprehensive on your personal policy, or you want zero hassle

2. Liability Insurance Supplement (LIS)

• What it covers: Injuries and property damage to others
• Cost: $10–$20 per day
• How it works: Provides liability coverage beyond the rental company's basic limits
• Limits: Usually $1 million combined
• When to buy: You have no personal auto insurance, or your limits are low (under 100/300/100)

3. Personal Accident Insurance (PAI)

• What it covers: Medical bills for you and passengers
• Cost: $5–$10 per day
• How it works: Pays medical expenses, ambulance, hospital stays
• Limits: Typically $5,000–$25,000 per person
• When to buy: You have no health insurance or MedPay/PIP on your auto policy

4. Personal Effects Coverage (PEC)

• What it covers: Stolen personal belongings from the rental
• Cost: $2–$5 per day
• How it works: Reimburses stolen items (luggage, electronics, etc.)
• Limits: Usually $500–$1,500 total
• When to buy: You travel with expensive items and lack homeowners/renters insurance coverage

Total cost of all coverage:

$15 (CDW) + $15 (LIS) + $7 (PAI) + $3 (PEC) = $40/day

For a 7-day rental: $280 added to your rental cost

Rental company tactics:

Rental agents earn commissions on insurance sales and may: • Imply coverage is mandatory (it's not, if you have your own) • Use scare tactics ("You'll be liable for the full vehicle value!") • Rush you through paperwork • Upsell "peace of mind"

Know your rights: • You can decline all coverage if you have your own insurance • Agents must accept your refusal • You're not required to prove coverage at the counter (though some verify)

For more on coverage decisions, see how much car insurance do I need.

When You Should Buy Rental Car Insurance

Despite having personal coverage, buying rental insurance makes sense in these situations:

1. You don't have collision or comprehensive coverage

• Liability-only policy: Covers damage to others, not the rental vehicle
• Older car: You dropped collision/comprehensive to save money
• Risk: You're personally liable for rental vehicle damage (up to full value)
• Solution: Buy CDW/LDW from rental company

2. You have a high deductible

• Example: $1,000 or $2,000 collision deductible
• Risk: Out-of-pocket cost if rental is damaged
• Solution: CDW eliminates the deductible

3. You want to avoid a claim on your personal policy

• Rate increases: Filing a claim raises your premiums
• Hassle: Dealing with your insurer, paperwork, delays
• Solution: CDW keeps your policy claim-free

4. You're renting a luxury or exotic vehicle

• High repair costs: Luxury vehicles are expensive to fix
• Credit card exclusions: Many cards exclude high-value vehicles
• Personal policy limits: May not cover full value
• Solution: Buy CDW and increased liability coverage

5. You're traveling internationally

• U.S. policies rarely cover foreign countries (except Canada)
• Credit card coverage varies by country
• Local laws differ
• Solution: Buy rental company insurance or purchase international coverage

6. You don't have personal auto insurance

• No car, no policy: You don't own a vehicle
• Risk: Zero coverage for rental
• Solution: Buy full coverage from rental company, or get a non-owner policy

7. You're renting for business

• Personal policies often exclude business use
• Employer may not cover rental vehicles
• Solution: Verify employer's coverage or buy rental insurance

8. You value peace of mind

• Zero hassle: Damage? Walk away, no paperwork
• No financial worry: No deductible, no claim, no rate increase
• Convenience: Worth the cost for stress-free travel

When you can safely decline rental insurance:

✓ You have collision and comprehensive on your personal policy ✓ Low deductible ($500 or less) ✓ Adequate liability (100/300/100 or higher) ✓ Credit card offers primary coverage (and you meet requirements) ✓ Renting a standard vehicle (not luxury or exotic) ✓ Domestic rental (U.S. or Canada)

For guidance on coverage needs, see types of car insurance coverage.

How to Decide: Flowchart for Rental Insurance

Use this decision framework:

Step 1: Do you have personal auto insurance?

• No: Buy rental company insurance (CDW + LIS minimum)
• Yes: Continue to Step 2

Step 2: Does your policy include collision and comprehensive?

• No (liability only): Buy CDW from rental company
• Yes: Continue to Step 3

Step 3: What's your deductible?

• High ($1,000+): Consider buying CDW
• Low ($500 or less): Continue to Step 4

Step 4: Are you renting internationally (outside U.S./Canada)?

• Yes: Buy rental company insurance (personal policy likely doesn't cover)
• No: Continue to Step 5

Step 5: Does your credit card offer primary rental coverage?

• Yes, and you'll pay with that card: Decline CDW, keep personal liability
• No, or card offers secondary only: Continue to Step 6

Step 6: Are you renting a luxury or exotic vehicle?

• Yes: Buy CDW (high risk, high cost)
• No: Continue to Step 7

Step 7: Do you want zero hassle/financial worry?

• Yes: Buy CDW for peace of mind
• No: Decline all coverage, use your personal insurance

Final recommendation:

• Minimum coverage: Liability (personal or rental company)
• Recommended coverage: Liability + collision (personal, credit card, or rental CDW)
• Full protection: CDW + LIS + PAI (if lacking personal coverage)

For more on making coverage decisions, read how much car insurance do I need.

Tips to Save on Rental Car Insurance

Reduce costs without sacrificing protection:

1. Use a credit card with primary coverage • Chase Sapphire Reserve, Amex Platinum • Eliminates need for CDW • Saves $15–$30/day

2. Buy a non-owner policy if you rent frequently • Costs $200–$400/year • Covers all rentals • Cheaper than buying rental insurance each time

3. Bundle with travel insurance • Comprehensive travel insurance includes rental coverage • Costs $50–$100 per trip • Covers more than just rentals (trip cancellation, medical, etc.)

4. Lower your personal deductible • Reduce collision deductible to $250 or $500 • Small increase in premiums ($10–$20/month) • Avoid needing to buy CDW

5. Increase your liability limits • Raise to 250/500/100 or higher • Small cost increase • Eliminates need for rental company's LIS

6. Decline unnecessary coverages • Personal Effects: Homeowners/renters insurance covers belongings • Personal Accident: Health insurance and personal auto MedPay cover medical bills

7. Rent from companies with better base coverage • Some rental companies include basic liability in the rental price • Compare rental agreements

8. Book through corporate or membership programs • Costco, AAA, corporate rates often include better coverage • Some employers provide rental coverage

9. Use airline or hotel loyalty programs • Elite status may include complimentary rental insurance • Check program benefits

Cost comparison example:

Scenario: 7-day rental

• Buying rental company insurance: $40/day × 7 = $280
• Using personal insurance: $0 (covered)
• Using credit card primary coverage: $0 (covered)
• Non-owner policy: $300/year ÷ 4 rentals = $75 per rental

Savings: $205–$280 per rental

For more on lowering costs, see how to lower car insurance.

Frequently Asked Questions