Rental car insurance comes in many forms. The 4 options are loss damage waiver (LDW), collision damage waiver (CDW), personal effects coverage (PEC), personal accident insurance (PAI), and liability. Each type of coverage is there to protect you, your passengers, the rented vehicle, your personal belongings, and any injuries that may occur, or damages to another person’s property or vehicle as a result of a collision.
Car rental agencies insure their fleets, so what they’re offering isn’t actually insurance. If you pay for the different coverage options, it means they can’t pursue you for any damages.
Rental car insurance is offered to you at the counter when you pick up your vehicle. Unfortunately, it can create undo pressure on you to make a quick decision. It’s a good idea to know how you might be protected ahead of time. If you know the rules, you can make a smart, informed, and financially savvy decision.
Here is an overview of the available rental car insurance coverages:
|Loss Damage Waiver & Collision Damage Waiver||
Protects you from charges related to theft and collision of the rental car. CDW or LDW is not an insurance policy, by signing the agreement, you’re paying the car rental agency to waive its right to pursue you for damages or losses.
Cost: $9 to $30 per day
|Personal Accident Insurance or PAI||
Provides accidental death and dismemberment coverage to the driver and any passengers in the car at the time of the accident. Rental car agencies each have a different benefits package, but typically the driver is covered up to $100,000 and passengers receive $10,000.
Cost: $7-$10 per day
|Liability Insurance or LI||
Protects you from being held liable in a collision. If you are at fault in a collision and injure another person, or damage someone else's property like their vehicle, you will want to have liability insurance. Liability will cover the costs associated from the crash including the vehicle and medical benefits to anyone injured.
Cost: $15-$30 per day
|Personal Effects Coverage or PEC||
Sometimes called personal effects protection gives you peace of mind for your personal belongings and valuables. However, there is a stated limit and will often need a deductible paid before a claim is paid out. Typically, the coverage is $500 with a $25 deductible per person, but there are limits as to how many passengers can claim.
Cost: $2-$5 per day
While paying for rental car insurance may give you peace of mind, it’s not always a smart financial decision. If you have a personal auto insurance policy with collision, comprehensive and OPCF27 (liability for non-owned automobiles), a rewards credit card or even home insurance you may want to avoid purchasing additional coverage.
Here are the 4 types of insurance offered by rental car agencies and when you can avoid paying for them: