Laura Berry is a former State Farm insurance producer and insurance expert.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years

UPDATED: Oct 19, 2021

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Supplemental rental insurance, primary coverage, excess liability insurance, damage waivers and deductibles are all terms that you will be bombarded with when you are renting the car and signing documents at the rental counter. While you may have a basic understanding on how your personal insurance works when you are driving your own car, most drivers throw this out of the window when they taking possession of a vehicle that they are paying to drive for a short period of time. While there are some differences between personal auto insurance and rental insurance, there are several similarities. This is what you will need to learn before you elect to pay for coverage waivers and additions. Start comparing car insurance rates now by using our FREE tool below!

Rental car insurance that is sold over-the-counter at the leading agencies can be extremely expensive. This is especially true when you are renting a car for a week or more as the insurance fees are often charged on a daily basis. If you want to keep your hard-earned money in your pocket to spend on things that you can enjoy, you should find out just what your insurance will cover you for. Read this guide to personal car insurance and rental cars so that you can learn everything that you need to know.

Is buying rental car insurance a smart move?

If you are not concerned with the cost of adding damage waivers or liability insurance to your rental contract, then having excess coverage could be a great thing. While having this coverage seems like a smart move, you need to understand just how the coverage works before you waste your money on protection you might not even be able to use.

Supplemental coverage only kicks in after any primary coverage you carry has been exhausted.

Buying rental car insurance is a smart decision if you do not have coverage of your own, if you have a basic car insurance policy, if you feel like you do not have enough liability protection, or you are renting for business use. If you have a full coverage personal auto insurance policy, you have high limits of liability, and you are renting a private passenger car in the United States, taking the optional coverage is an added cost that will not pay off in most cases. You might be wondering why many experts recommend saving your money. The reason for this is because of how your personal coverage protects you.

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How does a personal car insurance policy cover a rental?

There is a widespread debate as to whether an insurance policy follows the car or the driver. While some claim there is one right answer, there is not. In some cases a policy will follow the car and in others the driver. When a rental car is involved, the insurance on your covered vehicle will follow the driver to the rental. This is because the rental car is defined in the policy as a covered auto and temporary substitute.

How is a temporary substitute covered?

Insurance companies may determine your rates based on the type of vehicle that you own, but surprisingly enough they offer you coverage in scenarios where you are driving more than just this covered auto. One of the additional covered vehicles is a temporary substitute, which is a rental car or a borrowed car that you do not own and are operating because you are unable to operate your vehicle.

If the car that you are renting falls under the temporary substitute classification, then both your liability coverage and physical damage coverage will extend to the auto if it is carried. Here is a breakdown of how each coverage extends in a borrowed or rented car:

  • Bodily Injury and Property Damage Liability:

This third-party coverage will follow when the named insured or listed drivers are driving a rental under the primary policyholder’s name. If you carry state minimum limits and cross state lines, the limits will automatically increase to satisfy other state-mandated requirements.

  • Comprehensive and Collision:

If you carry comprehensive and collision cover to protect your vehicle from losses that result in damage, this will also extend automatically to a rental that is rented by the named insured. Each of these physical damage coverage options will pay up to the fair market value when a damage claim is filed to repair the rental after a covered loss. If a claim is filed, you will be obligated to pay your deductible before your insurer will pay.

  • Uninsured Motorist and Medical Payments:

Uninsured Motorist and Medical Payments provide you with medical protection if you are in a collision. Each of these will also apply when you are in a rental if they are carried on your personal policy up to the limits that are stated on your declarations page.

Considerations to Keep in Mind When You Are Using Personal Insurance

While each of these forms of coverage do extend, there are scenarios where having supplemental coverage could be appropriate. If you have an older vehicle and you do not have full coverage on the vehicle, electing to pay for a waiver could give you peace of mind. It is also appropriate if you have full coverage and carry very high deductibles that you cannot afford to pay for if you were to file a loss.

If you buy a waiver, the claim is typically not reported in a way that it will affect your rates.

You should be aware that most personal carriers will not pay for loss of use in a rental car claim. This is the amount that the agency is losing in rental fees because the car is being repaired in the shop. You will be obligated to pay this out-of-pocket if you do not have a waiver or additional protection through your credit card. You also are at risk of your claim being filed against your policy and charged as a chargeable loss if you are using your insurance.

It is very important that you review the terms and conditions of your policy when you are going to rent a vehicle. You should know your limits, the type of coverage that you carry, and whether or not the coverage will extend to the type of car that you are renting. If you feel like adding full coverage will benefit you, you should price the cost of full coverage. Be sure to compare the rates with other carriers by using an online brokerage-style tool, and you can build a comprehensive policy and save money in the process. Start comparing car insurance rates now by entering your zip code in our FREE tool below!