Traveling can be so much fun and very exciting, but it is also a lot of responsibility. Besides packing, choosing a destination, planning your itinerary, and choosing your modes of travel, there are other aspects a responsible traveler must consider.
It may not be as exciting as some of the other things you have to think about, but insurance should be on your list of things to check before you leave on your trip.
If you are planning to rent a car, it is important to know what insurance you already have. Rental car companies will often offer you coverage with an insurance product called accident insurance, and you may find yourself wondering if you need it.
In order to know if you need accident insurance, you need to understand how insurance works. Insurance is basically a contract that states that an individual or a company will receive financial protections or reimbursements from the insurance company to cover them against losses. You pay for insurance with the hope that you will never need to actually use it.
When you rent a car, there are four types of insurance that you may be asked if you would like to add to your car rental, so let’s look at those so you can better understand the differences. Having the right information before you need to make a decision will help you make the best decision for you and your situation.
The Four Types of Insurance
Collision Damage Waivers
First, there is the Collision Damage Waiver. The collision damage waiver is offered by rental car companies, and its basic purpose is to relieve you of responsibility for paying to repair or replace the rental car if it is damaged or stolen. This usually includes a deductible, so keep that in mind.
When it comes to insurance, the good rule of thumb is that if you can not afford to easily replace an item, then you need insurance. Unless you are in a particularly fortunate financial position, it is probably not going to be easy for you to replace a vehicle for a company. So, this waiver is highly recommended. It is so common in fact that it may be part of your daily rate already, so be sure to ask your car rental company if the collision damage waiver is incorporated into your estimate or if you need to add it separately.
Supplemental Liability Insurance
Next, there is supplemental liability insurance. Liability insurance is most often used to cover damages to other people’s property and the medical costs for the injuries of other people that they sustained in an accident that is deemed to be your legal responsibility.
In the United States, every state has a minimum amount of liability insurance required on car insurance policies. It is likely that you already have liability insurance, but you will need to see if your insurance extends to your rental. If not, or if you are renting in a state with a higher minimum, you may need additional liability insurance from your car rental company.
Personal Effects Coverage
Additionally, there is personal effects coverage or theft protection. As you can probably guess, this covers the theft of possessions up to a set dollar limit from the rental car. As with liability insurance, you may already be covered. When you have a homeowners insurance policy or a renters insurance policy, the loss of personal items stolen from your car may already be covered. You will need to check your policy details in order to be sure.
Another way you may be covered is if you have travel insurance. Some policies have baggage loss or damage benefits, so you may have protection for your baggage if it is lost, damaged, or stolen while you are traveling. Again, check your policy documents if you have questions or concerns.
You may also be offered a Loss Damage Waiver. This is not another type of insurance, but it is more like a combination of two types of insurance. The loss damage waiver combines the coverage benefits of a collision damage waiver and theft protection.
Unlike collision damage waivers that cover you in the case of an accident, loss damage waivers cover you in the event that the rental car you are using is stolen during the period of time that you have your rental. Loss damage waiver will cover car replacement, so as mentioned with collision damage waivers if you can’t afford to replace a whole car for the rental company, it is probably a good idea.
Sometimes collision damage waivers and loss damage waivers will be packaged as one additional policy you can purchase, but in the United States, for example, the policies are often sold separately.
As with any insurance policy, be sure to read what is covered before you agree to the added costs. It is also worth noting that neither the collision damage waiver or the loss damage waiver cover the damage to other people or their property, so liability insurance will still be needed even if you have one or both of these policies.
Personal Accident Insurance
The final type of insurance you will be asked to consider when renting a car is personal accident insurance. Personal accident insurance works similarly to liability insurance. In the way that liability insurance covers other people’s property damage and injuries sustained in an accident, personal accident insurance covers medical, ambulance, and death benefits for you as the rental car driver and your passengers.
As with the previous insurance types we have covered here, you may already have the protection you need. For example, your health insurance, car insurance, and life insurance policies may all cover aspects of the coverage offered by the personal accident insurance.
You will also want to check the insurance policy coverage that the car rental agency provides.
It is possible that the insurance policy that comes with your rental has the coverage you need.
So, you may be questioning if you ever need any additional coverage. Well, do not rule out the possibility that you need personal accident insurance. While your personal policies probably have you covered, if you have ever dealt with costs after insurance, you know that not everything is covered.
When you have accident insurance, if you reach the limits of your personal policies, that is when the accident insurance coverage will kick in. As mentioned above, you should acquire insurance when you can not afford to easily pay for the replacement of an item.
Since your health and well-being, as well as your passengers’, is priceless and irreplaceable, additional insurance coverage is definitely worth at least considering. Often premiums are minute fractions in comparison to what you would have to pay out if you actually incurred the costs they would have protected you against.
For example, if you can pay an additional $17.50 on your car rental and be completely covered in a worst-case accident scenario, then it is worth it, especially if the costs you face without it are say on average $10,000 for someone who is uninsured.
Accidents happen. If we could avoid accidents, we would, but sometimes, that is just not possible. What is possible is being prepared to expect the unexpected.
As they say, it is better to be safe than sorry. No industry on the planet represents that saying more than insurance.
Summary
Before you find yourself on your way in your rental car and off on your next adventure, one thing you will have to think about besides where you are going, what you will do, where you will eat, and what you will wear is insurance.
You need to ask yourself if you have the right protection for your peace of mind and your budget. You will need to consult your personal policies to know what is covered and where they may fall short. If you can afford the insurance policy, but you can’t afford the costs that you may incur without the insurance policy, then it is definitely worth it to add to your travel budget.
Be sure to ask your car rental provider what insurance is already provided if any, and be prepared to be asked if you would like to purchase additional policies. If you know what to expect, you will not feel pressured or overwhelmed at the rental counter when the question of additional coverage comes up.
Confidence in your decisions and the right coverage will give you one less thing to worry about in your travels.
Sources:
Understanding Collision Damage Waiver (CDW)
https://www.investopedia.com/terms/l/liability_insurance.asp
https://www.bandingin.com/en/understanding-the-definition-of-personal-accident-in-an-insurance
