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.

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