Travel experts explain 9

Travel car rental Insurance

By Rick Steves

When you rent a car, you are liable for a very high deductible, sometimes equal to the entire value of the car. Fortunately, there’s usually more than one way to limit your financial risk in case of an accident.

Baseline rates for European rentals nearly always include basic, mandated liability coverage — for accident-related damage to anyone or anything outside the car. (The company may offer additional liability insurance, but I wouldn’t buy this without some extenuating reason.)

It’s (usually) up to you, however, to decide how to cover the risk of damage to or theft of the car itself. You have three main options, all described below: buying a “collision damage waiver” (CDW) through the car-rental company (easiest but most expensive), using your credit card’s coverage (cheapest), or getting collision insurance as part of a larger travel-insurance policy.

If you’re renting in either Ireland or Italy you’ll have little choice but to buy the company’s CDW. If you need a car for at least three weeks, you’re probably better off leasing, which includes zero-deductible collision and theft insurance (and is tax-free to boot).

Car-Rental Company CDW

The simplest solution is to buy a CDW supplement from the car-rental company (it’s the main extra included in the “inclusive” rates you’ll see in quoted prices). This coverage technically isn’t insurance; rather, it’s a waiver: The car-rental company waives its right to collect a high deductible from you in the event the car is damaged. Note that this “waiver” doesn’t actually eliminate the deductible, but just reduces it. CDW covers most of the car if you’re in a collision, but usually excludes the undercarriage, roof, tires, windshield, windows, interior, and side mirrors.

CDW generally costs $10–30 a day (figure roughly 30 percent extra). Sometimes the CDW charge itself is a little less when combined with theft/loss insurance as part of an “inclusive” rental rate — it’s often cheaper to pay for this kind of coverage when you book than when you pick up the car.

When purchasing CDW, the reduced deductibles can still be substantial, with most hovering at about $1, 000–1, 500 (or more, depending on the car type). Most rental companies also offer a second tier of coverage, called “super CDW” or “zero-deductible coverage” to buy down the deductible to zero or near zero (if you didn’t opt for this when booking from home, expect to hear a sales pitch from the counter agent). This is pricey — figure about an additional $10–30 per day — but, for some travelers, it’s worth the peace of mind.

When comparing rental options online, beware that some European rental agencies quote “basic” rates that include CDW/theft coverage. (In this case, it’s not an optional extra, so you can’t decline it.) If these CDW-inclusive rates seem too good to be true, they probably are: The unwaived deductible is almost certainly especially high (expect $2, 000–3, 000) you’ll have to spend extra to buy the “super CDW” anyway to get the deductible down to a reasonable level.

Given these costs, the alternatives to paying for the rental company’s CDW are worth considering carefully: credit-card coverage or collision coverage through your travel-insurance provider.

Credit-Card Coverage

Car-company CDW surcharges can seem like a racket when you consider that most credit cards already include collision coverage. By paying with the right credit card, you get zero-deductible collision coverage (comparable to “super” CDW)...likely for free. In other words, if your car is damaged or stolen, your credit card will cover whatever costs you’re liable for. The only major downside: If you do end up in an accident, dealing with credit-card coverage can be more of a hassle than what you’d encounter with the car-company CDW. But if a potential headache seems like a worthwhile trade-off for certain — and significant — cost savings, look into this option.

To make this work, first double-check that your credit card does indeed offer this coverage. Remember that restrictions apply and coverage varies between issuers: Get a complete description of the coverage offered by your credit-card company. Ask in which countries it is applicable, which parts of the car (if any) are excluded, the types of vehicles that are eligible, whether it covers theft/loss, the maximum reimbursement allowed (if it’s less than the price of the car, the rental company may require you to buy their CDW), and the maximum number of rental days covered (if your rental period exceeds that number, your card won’t cover any of the rental). Have them explain the worst-case scenario to you. It can be smart to ask for a “Letter of Coverage” — take a hard copy of it with you to the rental counter in Europe.

Once you’ve confirmed your credit card’s coverage, be sure to decline the CDW offered by your car-rental company. If you accept any coverage offered by the rental agency, you automatically forego your credit-card coverage. (In other words, if you buy CDW that comes with a $1, 000 deductible, your credit card will not cover that deductible.) This may also be the case if you book and prepay for a rental that already includes CDW and/or theft coverage — don’t sign any rental contract until you’re sure that by doing so you’re not accidentally accepting the rental company’s coverage.

A credit card’s collision coverage applies even if the damage happens while the car’s being driven by someone else, as long as that other driver, and the cardholder, are both listed as drivers on the rental contract. Remember to use that same card not only to reserve the car, but also to pay for the rental itself, as well as any other related fees you’re charged, whether when booking at home, or when picking up or dropping off the car in Europe — switching cards can invalidate the coverage.

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