Now that gas prices are starting to come down, millions of Americans will hit the roads this summer – some of them in rental cars. Whether you’re traveling around the United States or internationally, insurance on your rental car is not a decision to be made at the last minute when you’re picking up your vehicle.

At the rental counter, you’ll be offered a series of insurance coverages that can almost double the cost of your daily rental. That’s the wrong time to be guessing about whether or not you actually “need” the coverage – or if your personal auto insurance or even the credit card you are using might already cover your potential exposure.

It’s estimated that car rental companies get as much as 20% to 40% of their revenue from “extras” like insurance, and fuel surcharges, GPS and even car seat rental for children. If you plan ahead, you can easily avoid most of those costs.

On the other hand, if you don’t understand your own policy limitations, and make a hasty decision to decline coverage at the counter, you could be exposed to thousands of dollars in deductibles and “loss of use” charges in case your rental car is damaged, even if you are not at fault.

Do You Need Rental Car Insurance?
If you don’t own a car, you’re probably wise to purchase insurance from the rental car company. But your own car insurance likely covers most of the costs of insuring a rental car. Most personal auto insurance policies in the U.S. and Canada extend your existing coverage—including liability, collision, and comprehensive—to rental cars used for personal travel, with the same limits and deductibles as your own vehicle. But if your personal policy has a deductible above $1,000, rental car insurance with zero deductible protects you from large out-of-pocket expenses.

The emphasis here is on “personal” travel. If you’re on a business trip, your personal insurance likely won’t cover your rental car. Check in advance on the restrictions on your own policy for business rentals.

You might also want to use a credit card that offers rental car insurance. Several premium cards offer rental car coverage, but check the limitations. Cards may offer primary coverage, which pays before your personal auto insurance, or secondary coverage, which only reimburses costs not covered by your personal insurance. And, of course, filing a claim with your personal insurance will likely result in higher premiums next year!

Note: If traveling internationally, your auto insurance and credit card coverage likely excludes rentals outside the United States and Canada. Purchase rental car insurance from the rental company or a third-party provider.

What’s Covered?
Car rental insurance typically covers damage to the rental vehicle, liability for injuries or property damage, personal accidents, theft of personal items, and roadside assistance. Again, this may duplicate coverage you already have on your own auto policy.

The coverage offered by a credit card likely only covers a Collision Damage Waiver (CDW) that reimburses you for damage or theft of a rental vehicle. Coverage typically does not include liability for injuries or damage to other property. That may be covered by your own policy or your homeowners policy. You must pay for the entire rental with that card to activate your coverage.

There is one exposure that is not covered by most rental car insurance policies: loss of use. Car rental companies can charge you for the number of days the car is out of service, while being repaired! If you have an accident, this uncovered charge can add up to thousands of dollars. (Laws on loss of use vary by state.) Ask at the rental counter if the CDW waiver you’re about to turn down includes “loss of use” coverage. Your own auto policy is not likely to cover this potential expense.
Remember, the car rental company has your credit card – and it will be charged if you don’t have coverage! Even premium cards that offer loss of use coverage, can result in delays in getting these charges reimbursed.

Emergency Assistance
The car rental company may also offer, at additional charge, an “emergency roadside assistance” coverage. It’s another tempting add-on, but your own car insurance or membership in AAA likely covers this issue. Most major providers extend coverage to rental cars if you’re the named driver. This makes it easy to use your existing plan during a road trip.

Again, this is something to consider in advance—not when you’re standing at the rental counter. Of course, if you’re renting an RV or an exotic car, there’s a completely different set of insurance issues and costs.

Paying for duplicate insurance is a real waste of money. But understanding your coverage before you rent a car is priceless peace of mind. That’s The Savage Truth.