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 credit card.
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.