Rental car insurance not always a waste of money

Whenever you rent a car the rental agency offers you extra insurance in case the car is damaged, stolen or in a crash. Some call it the rental car "up sell," and to be sure, car rental agencies rake in a pile of money -- even though most customers are probably covered by their own personal auto insurance.

But we all know that making a claim against your personal auto policy can raise your premiums. And in some cases, you can still end up paying more out-of-pocket than if you'd simply paid for the extra protection
 
Even though most personal auto insurance extends to rental cars, it only covers the rental for the same coverage you have on your personal vehicle. Karl Newman of the Northwest Insurance Council says regardless of how you feel about rental car insurance, it's a good idea to review your personal auto policy to make sure you know how much rental coverage you really have.

"For example, if you don't have collision and comprehensive coverage on your personal vehicle because it's older, all you're going to get extended is the liability piece of it.  And typically rental vehicles are recent models, this year or last year," Newman explained.

Another factor to consider is the "loss-of-use" fees. Most rental car agencies hold you responsible for every day a damaged vehicle is out of service.  Loss of use fees are typically not covered by most auto insurance policies. Many auto policies exclude rental coverage in certain foreign countries. And don't forget your deductible, which could be far more than what you'd pay the rental company to simply walk away. Newman also recommends checking car rental regulations in the state where you're renting.

"Some states such as Hawaii, can require you to settle your insurance situation before they'll let you leave," he said. 
   
So before you plan your next car rental, review your auto policy coverage and your claims history, evaluate your driving abilities and the conditions you'll face at your destination, review any supplemental insurance your credit cards may offer, and evaluate the pros and con in your situation.

Arguments against rental insurance: 

You can file a claim with your own insurance company and they'll take care of it. And if you use a major credit card, you many have supplemental coverage that reimburses you for what insurance  doesn't cover.  Just remember, credit card rental coverage is strictly supplemental. Your personal insurance must first process  your claim..
    
Arguments for getting the extra coverage:  

If you don't have personal auto insurance.  If your auto policy is not sufficient to cover rentals.   If the cost of the extra coverage outweighs the cost of paying high deductibles or higher premiums if you have to make a claim.

In many situations, extra rental protection can be a waste of money.  But it can also make sense in the long-run depending on your own policy and your driving situation. By doing your homework ahead of time you can plan ahead either way and avoid the last-minute pressure to make a decision at the counter based on ominous suggestions from a car rental employee.