Ask Stacy: Should I Buy Rental Car Insurance?

Rental car insurance -- also known as "collision damage waiver" and "loss damage waiver" -- can often cost as much the car rental. Is it an outrageous upsell or necessary protection?

Ask Stacy: Should I Buy Rental Car Insurance? Photo by Tatiana Popova / Shutterstock.com

Welcome to “Ask Stacy,” a short video feature answering money questions submitted by readers and viewers. You can learn how to send in a question of your own below.

If you’re not typically a video watcher, give it a try. These videos are short and painless, and you’ll learn something valuable. But if you can’t deal with video, no problem: Just scroll down this page for the full transcript of the video, as well as some reader resources.

Today’s question is about rental cars; specifically, whether it’s necessary to pay for the comically overpriced, not-technically-insurance known as “collision damage waiver” or “loss damage waiver.”

Here’s what I think.

For more information on this topic, check out “7 Rental Car ‘Gotchas’ and How to Avoid Them” and “Don’t Get Fleeced on Your Rental Car This Summer.” You can also go to the search at the top of this page, put in the words “rental car” and find plenty of information on just about everything relating to this topic.

Finally, you can search for credit cards that offer rental car coverage at this page of our Solutions Center.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Hello, everyone, and welcome to your money Q&A question of the day. I’m your host, Stacy Johnson, and this answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.

Today’s question comes to us from Blanca:

“Should I purchase rental car insurance when renting a car?”

Well, Blanca, we’ve all had that feeling, haven’t we? We step up to the counter, and the clerk says, “Would you like to purchase the collision damage waiver?” Then, we think, “No, because it’s as much as it costs to rent the darn car.” But at the same time, we feel a little queasy. What if something bad happens?

Of course, this is exactly how the rental clerk wants you to feel. The clerk’s goal is to create an upsell by making you feel foolish for not adequately protecting yourself.

I personally don’t take out rental car insurance. If you have coverage on your car at home, you probably don’t need to pay for it either. There are, however, potential exceptions.

Generally, your personal car insurance also covers rental cars. But let’s say you only have liability on your car at home and no collision coverage, because your car is only worth $500. In that case, you might want to purchase the damage waiver at the counter, because your home coverage isn’t enough.

Another thing to check: Will your personal car insurance pay for damage to a rental car if you’re renting the car for business purposes? Check and see.

There’s also what’s called “risk of loss,” something that may not be covered by your personal car insurance. Risk of loss refers to the loss of income suffered by the rental car company when its car is temporarily taken out of service. In other words, the rental car company says, “Sure you’ve got coverage for this dented fender, but now we have to take this car out of service to fix that dented fender. We’re losing money because we’re not renting the car, so you owe us for that.”

Your home coverage may cover risk of loss, or it may not. So, this is something else to check.

A final point: Some credit cards offer rental car coverage. See if yours does. If so, your problem is solved. But be sure you understand the fine points of that coverage. For example, most credit cards exclude SUVs and pickup trucks from coverage. Know exactly what your credit card will and won’t cover before using it to meet this need.

Hope that answers your question, Blanca.

Now, it’s time to close with our quote of the day. This is from Ransom Riggs, author of “Miss Peregrine’s Home for Peculiar Children”:

“It’s easy to say you don’t care about money when you have plenty of it.”

Isn’t that the truth! You folks have a profitable day and meet me right here next time!

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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.

About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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Stacy Johnson
Stacy Johnson @moneytalksnews
I'm the founder of Money Talks News and have spent the last 40+ years in the personal finance trenches. I'm a CPA, author of a few books and multiple Emmy recipient. I'm ... More

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