No one expects to have a car accident during a Hawaii vacation. But car
accidents happen. The question is do you need rental car insurance when
picking up a rental car to protect yourself. The general rule of thumb
is that you decline insurance on a rental car that you use on vacation.
But, given the real possibility of getting into a
car accident, it's not so wise to reject the coverage out of hand. Here are some
things to consider.
The argument for declining rental car insurance is that you already have
coverage, either through an insurance policy or via the credit card you
use to pay for the rental. This may be true to a point.
In most cases, your liability coverage applies to cars you occasionally
drive in addition to your primary vehicle, including rental cars. But
the coverage is limited to what's stated on your policy. Minimum liability
coverage varies by state. In Hawaii, for example, the
minimum liability coverage is $20,000 per person, $40,000 per accident bodily injury, and $10,000
per occurrence of property damage. In California,
minimum liability is 15/30/5 coverage, respectively.
If you have collision coverage, which is typically required for a car that
you are still paying for, you do not need rental car insurance, a consultant tells
U.S. News & World Report.
If you are relying on your credit card's coverage, you need to make
sure you know what the fine print says and how much coverage you can really
expect. It's a good idea before your trip to contact your credit card
company and verify that car rentals are covered. Insurance via a credit
card typically covers collision damage and theft, but not personal injury
or personal liability, according to
CreditCards.com, a credit card comparison site.
A credit card also only provides secondary coverage, which means it will
just kick in when you have exhausted benefits available through your primary
insurance. Of course, you must make sure you pay for the rental with that
Most credit card companies exclude trucks, pickup trucks, luxury cars,
antique and exotic vehicles, ATVs, motorcycles, and large vans and SUVs
that seat more than a certain number of passengers (usually seven or eight).
A consultant speaking with CreditCards.com points out that if the rental
agency is short on vehicle choices and offers you a luxury car, it is
negating your credit card coverage and the agent probably won't tell
you, perhaps because he or she doesn't realize it.
The car rental company's Supplemental Liability Insurance (SLI) is
typically worth $1 million in coverage. It supplements less valuable liability
coverage that is automatic with all rental cars. These plans also supersede
your insurance, paying first if you cause an accident, and cover all authorized
drivers, including any traveling companion who drives your rental but
does not have insurance of their own.
The other type of coverage offered by rental car companies is known as
Loss Damage Waiver (LDW). This is not so much insurance as an agreement
to forgive the renter's responsibility for losses or damage to the
vehicle due to accidents, theft, and vandalism. You don't receive
a payment in the case of a collision, nor are you charged for the loss.
Rental companies also offer a Collision Damage Waiver (CDW), which protects
you from the property losses usually covered in personal insurance under
collision and comprehensive insurance. An advantage of this insurance
is that it is primary coverage, meaning it pays first. It also has no
deductible. And, since your insurance company is not involved in the claim,
CDW protects you from any rate increase that filing a claim might cause,
according to the
Hawaii Cooperative Extension Service.
The Extension Service says buying LDW and SLI would add $28 per day on
average to the cost of a Hawaii rental. CDW costs about $18 a day.
If you have coverage already you probably don't need more, though $1
million in liability is significantly more protection than any mandated
liability minimum. And, if like many people, you dropped collision and/or
comprehensive coverage on your car as soon as you made the final payment
and decline the rental agency's insurance, you could be on the hook
for the cost of a wrecked, vandalized, or stolen rental car.