What you need to know about credit card rental insurance

If you’ve done any amount of traveling, either for business or pleasure, you’ve probably had the following conversation. If you travel extensively, the response has probably become a mantra.

“Would you like to purchase supplemental insurance?”

“No, thank you.”

Rental car companies make a significant amount of their profit selling these add-ons, and employees are typically directed to push them - hard. Those of us who have trouble saying no have probably caved a few times. It can be an uncomfortable experience.

Thankfully, most people can confidently decline this additional coverage knowing their credit card company has them covered. Credit cards almost universally provide at least some form of rental car insurance - but there’s a catch.

Coverage varies from issuer to issuer, and assuming you’re fully insured without doing the research can be a recipe for disaster. Here’s everything you need to know about credit card rental insurance, so your next vacation or business trip can proceed worry-free.

Read the Fine Print

Rental car insurance is complicated and varies based on provider, like any form of insurance. What’s covered (or not) depends on from whom you purchase insurance.

One fee that credit cards may not cover is loss of use. This relates to the time the car is out of commission and the business loses money by not having the car in its fleet. Renters can minimize this fee by purchasing coverage from the rental company or from their insurance provider (only if their state demands that insurance companies cover this fee).

Most major credit card companies provide auto rental coverage as part of their perk package, but they vary when it comes to paying for any accidents or damage. For example, many cards have a limit on how much they’ll pay for a replacement vehicle.

Visa’s limit is $50,000. This disqualifies many luxury makes such as BMW, Mercedes-Benz, and Audi. Those who like to rent premium cars on their vacation should consider downgrading to avoid the possibility of paying for a replacement out-of-pocket.

Credit card issuers also have a limit on how long of a rental period they’ll cover. For example, American Express will only cover a rental of 30 days or less. Mastercard and Visa only cover trips of 15 days or less. This rule is a moot point for many but could affect those going on a long road trip.

Renting a car abroad comes with more rules and precautions than getting one domestically. Unfortunately, it can also result in loss of coverage. Some companies prohibit coverage if you’re abroad, while others only do so for specific countries.

You can request a copy of the coverage provided by your credit card before you plan on renting a car. Read through the fine to see what’s covered and what isn’t. It’s tedious work, but better to do it now than after you’ve been in an accident.

Those who don’t currently have a credit card can find information about the the card’s car rental loss and insurance policy online. Here are the links to the most popular issuers:

• American Express
• Visa
• Discover
• Mastercard

If you don’t qualify or don’t want a new card, you can also check to see if your auto insurance policy covers rental cars. Most companies will extend their coverage to rental cars. For example, if you have liability coverage for your own cars, that liability will extend to any rental cars you use in your own name. Between auto insurance and credit card coverage, you can likely decline any additional coverage the rental car company tries to sell you.

“I spoke with my own insurance agent on this issue,” said financial advisor Arnie K Cabiles of Achievable Wealth LLC. “Many personal auto insurance policies will also cover rentals similarly to the credit card coverage.”

How to invoke your car insurance coverage

• Check that your card offers collision damage coverage. This type of coverage is standard for most cards, but it’s vital to verify this before your trip. If you need to apply for a new card, it may take a couple of weeks to get a new card in the mail. Doing this in time for your vacation is a necessity if you want to rent a car and avoid paying extra for every day you rent.

• Understand your policy. Not every car or type of car is covered. For example, American Express’ policy states that it doesn’t include “full-sized sport utility vehicles, trucks, off-road vehicles, cars with an original manufacturer's suggested new retail price of USD $50,000 or more, and exotic cars.” American Express also only provides secondary coverage, common among issuers. This means you must file a claim with your auto insurance provider before filing one with AmEx.

• Deny coverage at the counter. Your credit card policy only kicks in if you deny the additional coverage at the rental car counter. You must pay for all expenses with the card, and it must be in the same name as the person driving the vehicle. Keep receipts and other forms of proof that you rented the car; you’ll need these if you have to file a claim later.

• File a claim immediately. Most credit card companies require that you file a claim within 90 or 180 days. However, the rental car company may add extra fees if you don’t file a claim immediately, which the credit card issuer may decline to pay. It can take some time to receive all the necessary documents from the rental car firm, which can further delay the process.

Related: Learn about your credit-based insurance score and how you can affect it.

About the Author

Zina Kumok is a Financial Health Counselor and Credit Counselor, certified by the National Association of Certified Credit Counselors, who writes extensively about personal finance.