Anyone who has ever rented a car has had to deal with it. The clerk behind the counter offers you rental car insurance or at the very minimum, a collision damage waiver to protect you in the case of an accident.
Not wanting to risk your entire financial future for a trip to Disney World, you opt to add the coverage, which increases the cost of the car rental three-fold.
Car rental companies are banking on your ignorance on the matter and have well-developed sales pitches to instill fear into you, all of which is used to increase their bottom line.
But it's typically completely unnecessary.
Why is it unnecessary? All personal auto insurance policies include liability coverage and at least offer physical damage coverage, which is not mandatory by state law.
The liability portion of your auto insurance policy is designed to protect you against the financial loss associated with causing bodily injury or property damage to another party or their property as a result of your negligence.
This coverage is in place regardless of what vehicle you're driving. You're obviously covered while driving your own car, but your coverage also “follows” you no matter what vehicle you're driving.
You're covered while driving your friend’s car or a rental car. And wrecking a rental car can be described as causing damage to someone else’s property…the rental company’s car in this case.
Keep in mind; the limits of liability on your auto policy dictate the maximum your insurance company will pay as a result of damage you caused. So, if you have state minimum liability limits and you rent and total a $50,000 Lexus, you would be on the hook for damages above what your policy covers.
But you may have automatic coverage for damage to rental cars as a result of how you paid for the rental. Many credit card companies offer limited rental car insurance coverage just for paying with their card.
It is recommended you contact both your credit card issuer and car insurance company before renting to be certain of the exact coverage each offer.