Should I pay for insurance on a rental car?

(BPT) - Maybe you’re signing the paperwork for a rental car, ready to zip up the West Coast for your end-of-summer vacation, when the agent asks if you’re also going to be adding rental insurance.

You pause. The agent starts talking about liability, and you see dollar signs piling up. You ask yourself: “Do I really need rental car insurance?”

“Whether it comes down to your personal auto coverage or purchasing coverage from the rental company is a personal choice,” says Sean Scaturro, Director of Insurance Advice and Certified Financial Planner practitioner for USAA.

The truth is there is no clear-cut answer when it comes to purchasing insurance for your rental car, so it’s easy to understand why you’re hemming and hawing.

Most personal auto insurance policies have coverage that will transfer to the rental car, so technically, you’re covered while driving the rental. The choice is whether you want to use the rental company coverage for their car so you don’t have to use your own policy.

If your insurance is covering the car, then your deductible comes with it. So if you’re liable for a fender bender while driving a rental car that causes $4,500 of damage, and your deductible is $1,000, you must fork over that amount — all for a car you don’t own.

The coverage offered by the rental car company is generally much more expensive than your personal auto policy coverage, so if you don’t get into any incidents while driving, you may have opted for an unnecessary expense.

“Knowing that your wallet is protected against something that happens when you’re in a rental car is a good feeling,” Scaturro says. “Consider if the value provided by the extra coverage is worth the expense.”

But what about credit cards covering rental car liability?

“Major credit card companies may offer rental car coverage if you use their credit card to rent the car,” Scaturro says. “It is important to understand the coverage limitations and exclusions for how coverage applies, for example, it may cover things like towing, theft or damage to the car but may have limitations on how you are covered for damage that you cause.”

In short, credit cards don’t offer liability coverage while you’re driving the rental. Some do, but most don’t.

“Relying solely on your credit card rental car coverage may not offer adequate liability protection for your financial situation,” Scaturro says.

Planning on renting a car anytime soon? Visit USAA.com/rentalcar for more information.

Sean Scaturro is the Director of Insurance Advice for USAA and a CERTIFIED FINANCIAL PLANNER(TM) practitioner. With more than 15 years of experience in the financial services and insurance industry, Sean has a wealth of knowledge advising clients on risk management, asset allocation, retirement planning, portfolio construction and estate planning.

Alliance services provided through USAA Alliance Services, LLC, which contracts with third parties that are not affiliated with USAA to provide products and services to USAA members and receives compensation on the sale of third party products and services. Third party providers have sole financial responsibility for their products and services.

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP(R) and CERTIFIED FINANCIAL PLANNER(TM) in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.

USAA means United Services Automobile Association and its affiliates. Financial advice provided by USAA Financial Advisors, Inc. (FAI), a registered broker-dealer, USAA Investment Management Company (IMCO), a registered broker-dealer and investment adviser, and for insurance, USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California, License # OE36312). Investment products and services offered by IMCO and FAI. Life insurance and annuities provided by USAA Life Insurance Co., San Antonio, TX, and in NY by USAA Life Insurance Co of New York, Highland falls, NY. Other life and health insurance from select companies offered through USAA Life General Agency, Inc. (known in CA (license #0782231) and in NY as USAA Health and Life Insurance Agency). Banking products offered by USAA Federal Savings Bank and USAA Savings Bank, both FDIC insured. Trust services provided by USAA Federal Savings Bank.

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