When you are renting a car, the representative is obligated to offer you insurance. The "just in case" speech combined with the relatively low cost may sway you to pay for something you probably will not use and may not even need - not because you are such a great driver, but because your credit card may already have you covered.

IN PICTURES: 6 Major Credit Card Mistakes

How Credit Card Rental Insurance Works
Credit card rental car insurance is a feature which covers damage caused to a rental car by collision and/or theft. The insurance is designed to pick up where your primary insurer's coverage leaves off, which includes paying your deductible. If you have no car insurance, your credit card company may act as your primary insurer (terms vary by company, so read the fine print to determine if your card carries this benefit). (Know which credit card rewards program is right for you before signing up. Learn more in Take Advantage Of Your Rewards (Card).)

For the credit card coverage to begin, you need to initiate and pay for the rental car with the credit card which carries the coverage. When prompted by the rental company to purchase their collision damage waiver (CDW) insurance, you must deny their coverage. You must be the primary renter of the car. Unless a loss occurs there is no need to notify your credit card company.

In the event of an accident, you will need to provide your credit card company with written notice of a claim. Submit your claim as soon as possible in order to receive benefits. (An accident can mean higher insurance costs - even if it wasn't your fault. Don't miss Will Filing An Insurance Claim Raise Your Rates?)

Activating the policy may be easy, but as with any insurance or credit card agreement, there are several restrictions you need to be aware of. Here are a few points to explore:

Terms and Conditions
Coverage provisions differ by credit card company (American Express, MasterCard, etc.), the credit card plans offered by the company (Gold, Platinum, etc.), and whether your card is for a personal or business account.

What Kind of Car
There are restrictions as to which types of vehicles are covered. Most plans will not cover vehicles that sell for more than a certain dollar value, or specialty vehicles including antique cars, campers or sports cars.

Who is Driving
You must be the primary renter of the car, and if someone else is driving the car at the time of the loss, then your credit card rental insurance may cover the damages. This feature depends on the credit card company. (Worried about how you're going to afford your next plane ticket? We'll show you the best credit cards for racking up frequent flyer miles in Best Frequent Flyer Credit Cards For (Almost) Free Travel.)

Where You Are
Some credit card rental insurance policies only apply to rentals within a small number of countries. In addition, some policies may become void if the damage occurred while the car was outside of the driving range specified in your rental agreement.

How Long You Are Renting
Different companies have different time limits for their coverage. For example, some cards covers up to 15 consecutive days while another card may offer coverage for the first 30 days of rental.

Coverage Limitations
Credit card rental insurance policies typically cover collision and/or theft, but these features do not include other possible costs such as personal injury or liability. The dollar amount provided within each policy may vary. In the event of an accident, some rental companies charge fees, for example administrative processing, diminished value and loss of use, which may not be covered by all credit card policies. Also, if you are intoxicated at the time of an accident, don't expect your credit card company to pick up the tab.

The Bottom Line
The amount of insurance you need for any circumstance depends on many factors. When it comes to rental car insurance, if you have a credit card then you may already be covered. Read your card member agreement or call your credit card company before you rent to avoid paying the price for overlapping coverage.

Catch up on the latest financial news in Water Cooler Finance: Crying Over Spilled Oil, And Buffett Goes To Court.

Related Articles
  1. Investing

    What’s Holding Back the U.S. Consumer

    Even as job growth has surged and gasoline prices have plunged, U.S. consumers are proving slow to respond and repair their overextended balance sheets.
  2. Economics

    Explaining Market Penetration

    Market penetration is the measure of how much a good or service is being used within a total potential market.
  3. Economics

    Calculating the Marginal Rate of Substitution

    The marginal rate of substitution determines how much of one good a consumer will give up to obtain extra units of another good.
  4. Savings

    How Volatile Exchange Rates Affect Your Vacation

    Those ever-changing fluctuations can make a difference in anything from your hotel room to an ATM transaction.
  5. Credit & Loans

    Can Corporate Credit Cards Affect Your Credit?

    Corporate cards have a hidden downside. If the company fails to pay its bills, you could be liable for the amount and end up with a damaged credit rating.
  6. Insurance

    Top 5 Car Insurance Companies in Florida

    Learn which car insurance companies lead the Florida market in terms of market share and new premium dollars, and discover which companies are growing fastest.
  7. Investing News

    What Is The New Credit Card Chip Good For?

    Under current U.S. credit card requirements, credit card issuers are required to issue chip cards as of October 1, 2015. Instead of swiping your card as you do now, you will slide the card into ...
  8. Home & Auto

    5 Cars That Will Save You Money in 2015

    Learn which cars will save you money in 2015, whether you are looking for a compact, mid-size or full-size car, or even a pickup truck.
  9. Credit & Loans

    5 Ways to Maximize Your Credit Card Points

    How to get the most bang for your rewards buck.
  10. Investing

    How to Effectively Compare Credit Card Rewards

    There are so many different reward credit cards that are available. Understanding how each type work will help you pick the best card for your needs.
RELATED TERMS
  1. Transferable Points Programs

    With transferable points programs, customers earn points by using ...
  2. Duty Free

    Goods that international travelers can purchase without paying ...
  3. Basic Reparations Benefits

    Automobile insurance coverage benefits that provide medical, ...
  4. Luhn Algorithm

    An algorithm used to validate a credit card number.
  5. Roll Rate

    The percentage of credit card users who become increasingly delinquent ...
  6. Truncation

    The requirement mandated by the FTC for merchants to shorten ...
RELATED FAQS
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  3. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  4. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  5. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>
  6. Which emerging markets are seeing the strongest growth in the insurance sector?

    The emerging market economies seeing the strongest growth for the insurance sector are primarily the main emerging market ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!