Rental-car insurance is a confusing minefield of options and exclusions. Here's how to make sure you're covered without getting gouged.
Did you know that the best-selling vehicle in the United States is excluded from Visa’s rental car coverage? That vehicle is a Ford pickup truck, and travelers find out too late that all trucks and open-bed vehicles aren’t eligible for the standard coverage offered free by some credit card issuers.
After rewards, rental-car insurance may be one of the most valuable benefits that your credit card offers. With the exception of a few products aimed at sub-prime borrowers, nearly every card offers rental-car insurance as standard. By declining the coverage offered by the car rental company, you should be covered by the policy included with your credit card.
Nevertheless, it’s important to understand that there are five key loopholes in these policies that can leave you exposed to liability at the worst possible moment. Fortunately, one card issuer has stepped up to provide optional coverage at a surprisingly affordable price.
The 5 holes in your credit card’s rental car insurance
- Types of cars. In addition to pick ups, Visa and others exclude full-size vans and many vehicles considered to be sports cars. American Express specifically excludes SUVs. While some people reserve these types of cars, others are merely upgraded at the last minute when their first choice is unavailable. Before renting your vehicle, make sure it is not excluded.
- Territorial limitations. Credit card companies seem to have a problem with countries that begin with the letter “I.” That’s the only way I can fathom why most rental car insurance policies excluded Israel, Ireland, and Italy. But Iran and Iraq aren’t excluded, so even that explanation makes no sense. Other exclusions can include Jamaica, Australia, and New Zealand. No matter where you plan on renting a car, make sure the card you use will cover you there.
- Method of payment loophole. The rental-car insurance offered by your credit card is only valid when you use your card to pay for your rental. That sounds simple enough, but how is that used in practice? What happens when you use an award from a loyalty program, or a coupon for a free day? Even though you might use your credit card to reserve your car and pay for taxes and fees, its insurance won’t cover you if don’t pay the base rate with your card. It’s for this reason that I never redeem points or miles for a free rental car, since the extra insurance needed diminishes the value of the award. Fortunately, the use of a simple coupon code shouldn’t invalidate your coverage, so long as you are still paying for most of the rental period.
- Rental length. Ever thought of renting a car with unlimited miles for an epic cross-country adventure? That works fine – unless you intend to be gone more than 15 days. If so, you aren’t covered by Visa’s policy, which excludes “Rental periods that either exceed or are intended to exceed fifteen (15) consecutive days within your country of residence or thirtyone (31) consecutive days outside your country of residence.”
- The agency agreement exclusion. All rental car coverages exclude any actions that violate your rental-car agreement. While it sounds reasonable to exclude such things as commercial use or using the car to commit a crime, did you know that most agreements prohibit driving on unpaved roads? Consider that next time you rent a car in a rural area or to visit a national park.
One great optional policy
Except for the agreement exclusion, the only way around most of these issues is to rely on the coverage from your existing car insurance policy or purchase the overpriced coverage that the rental car company offers.
This coverage is so expensive that it can even exceed the price of the rental – and it can cost hundreds of dollars for a longer trip. Fortunately, American Express offers a fantastic option: its Premium Car Rental Coverage.
For $24.95 per rental, they’ll cover you for up to 42 days with no deductible. Although this policy covers trucks and SUVs, it still excludes rentals in some countries. To enroll, you sign up your card once, and this policy is automatically applied when you use that card to rent a car and decline additional coverage.
You wouldn’t drive without insurance at home. Don’t do it when you rent a car.