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 18, 2021

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You may need insurance to own a car, but you do not necessarily need insurance to rent one. While you are not legally obligated to purchase over-the-counter rental insurance or specialized non-owned coverage when renting for the short term, failing to verify you are covered could be a significant mistake. Not only could you face a long, drawn-out fight with the rental company over damages to their inventory, but you could also hurt someone and have no coverage to fall back on, which will almost certainly land you in court. This is why it is critical to learn about how personal insurance kicks in when renting and the dangers of renting with little or no cover at all.

If you do not know the next thing about what you are and are not covered for when you rent a car, it is time to learn before signing the rental agreement or rejecting the expensive waivers and supplemental coverage. Start comparing car insurance rates now by using our FREE tool below! It takes just minutes to learn about coverage, policy terms, and types of alternative coverage that could help in a bind. Then, read this guide to ensuring rental cars and get the knowledge and the peace of mind you need before your trip to the lot.

Are you legally required to insure rentals that you do not legally own?

When you own a car, most state officials require that the owner show that they are financially responsible for damages they may cause when the car is being operated. This is why the registered owner must show their state’s Department of Motor Vehicles that the car is insured in their name by a licensed company to sell insurance in the state. In most cases, the policy must have at least a minimum amount of liability coverage that will pay for only third-party damages that you or someone in the family is negligent for.

While you will be temporarily responsible for a rental car while you are under contract, you are not the legal or registered owner at any time while you are renting.

Because of this, you are not mandated under any state law to purchase any liability coverage or physical damage cover to drive the car and comply with vehicle codes. In actuality, the rental company that owns the vehicle as part of their fleet is legally required to provide the minimum liability limits required by the state to you.

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What happens in the event of an accident?

Suppose there is an accident, and the damages exceed the minimum amount of coverage afforded to you. In that case, the company has coverage to protect itself. Still, it will not save you in court unless you buy supplemental plans and waivers. If you have been reckless or the victim’s insurer wants to file charges, you could face a court batted where you can be sued for financial compensation.

The first thing claimants will claim against is waivers or insurance purchased through the agency. If you have personal insurance, the claimant will file a claim against your company to protect you against financial devastation. You must also work with the rental to pay for vehicle repairs if the car is damaged. While you do not want to experience the blow-back of having an accident in a rental, you must know what to expect in the worst-case scenario.

Will your car insurance cover a vehicle rental?

Now that you know the law and you understand what happens in the event of an at-fault accident, you need to learn how your car insurance protects you when you already own a car. If you have insurance and you are the named insured on the policy, the coverage on the policy will extend directly to the rental car rented under the same name. Your insurance protects you because a rental is classified as a temporary substitute under the covered autos section of the policy.

What type of coverage is afforded?

Since the car is classified as a covered auto for up to 30 days, the broadest form of coverage carried on your policy will apply if you have a loss in the rental. The following will extend as an excess coverage if you do not purchase supplemental liability cover or any types of damage waivers:

  • Bodily Injury Liability (up to the per person and per accident limits)
  • Property Damage Liability (up to the per accident limit)
  • Comprehensive (subject to deductible)
  • Collision (subject to deductible)
  • Uninsured Motorist (up to limits)
  • Medical Payments (up to per-person limits)

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Are there any limitations or restrictions that you should know about?

Suppose you currently carry full coverage that will provide liability and damage protection. In that case, you may assume that you do not need any other type of insurance. This is a fair assumption to make, but you should know about the limitations of personal insurance.

Your policy may kick and pay for repairs up to the fair market value of the car. However, you will still be obligated to pay a deductible. In addition, the accident will be recorded on your claims history and could raise your rates. Your auto insurance also does not cover loss of use for rental cars. Loss of use is the charge associated with the rental fees that could have been charged when the vehicle was in the shop. If you are not renting a private passenger car, there is a chance the car will be excluded. Luxury cars with a high dollar value also may not be covered. If you are unsure, you should ask your agent.

Alternatives to Personal Insurance

If you do not want to rely on filing a claim on your policy, there are other options. For those who do not own a car, non-owned auto insurance policies will cover you when driving rentals and other borrowed vehicles. Non-owned insurance does not provide damage cover. Other options include:

  • Collision Damage Waivers
  • Supplemental Liability Cover
  • Personal Accident Insurance

The smartest thing you can do when renting a car in the U.S. is research how your coverage works. If you have a policy, find out how much coverage you will have before you are pressured into buying high-priced daily rates. If you want more protection or do not have insurance, it might be time for a non-owned policy. Compare the rates for coverage from providers through an online quoting system, and then you can keep the costs of renting down. Compare car insurance rates now by entering your zip code in our FREE tool below!