Deal or Scam: Rental Car Insurance

We've all been there: you're signing the papers to rent a brand-new Ford Focus for a week, when the representative asks:

"Are you interested in purchasing rental insurance?"

Um... are you? Is it a good deal? Do you really need it?

Today we are talking about Rental-Car Insurance -- the pros, the cons, and whether you do, in fact, need it.

The 411 on Rental-Car Insurance

Just like every other type of insurance, rental car insurance is there to protect you in the event of an accident. Since you're technically not driving your own vehicle, liability becomes a little trickier. There are four main types of rental car insurance generally offered:

A Collision and Damage Waiver (CDW) prevents the rental company from billing you if the vehicle is stolen or damaged.
Liability Insurance covers the costs if you injure someone else while you’re driving.
Personal Accident Insurance takes care of any medical treatment you might need after an accident.
Personal Effects Coverage protects items stolen from the car.

These options are usually offered separately or combined in a comprehensive package. With rental car insurance, you pay per day: CDW costs in the neighborhood of $9 to $19; Liability Insurance runs $7 to $15; Personal Accident Coverage is anywhere between $1 to $7; and Personal Effects Insurance is generally around $1 and $4. So, if you rent a car for a week, and want CDW and Liability, you're looking at somewhere in the neighborhood of $100+/- for coverage. As usual, if you bundle multiple insurances, you'll save!

The Pros

If you're a member of AAA, you can get a discount on car rentals, which would balance out an insurance policy.
While you may think you're covered by other insurance policies you have, the "fine print" usually has exceptions and/or details that will only partially cover you, or, worst-case scenario, not cover you!
Peace of mind.

The Cons

It's expensive.
You may already be covered: personal auto insurance often provides rental collision and theft coverage, health insurers generally cover medical bills, and homeowner’s/renter’s insurance can reimburse you for items stolen from a rental car.

Should You Purchase Rental Car Insurance?

Before leaving for vacation, check with your insurance company about what your various policies cover. If you have extensive coverage, you're probably ok without it. What could behoove you is revising one or more of your policies to give you a better safety net in the long run.

If your coverage is lacking, or you don't have the immediate funds to up your policies, then definitely consider some sort of rental car insurance. It will give you the peace of mind you need to enjoy your vacation!

Sources: 1. AAA | 2. Credit.com.
Photo credits: 1. Flickr