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Does Your Credit Card Cover All Your Car Rental Insurance Needs?

credit card car rental insuranceKnowing whether you need to buy car rental insurance is confusing in the best of times. It’s even more so, when the rental agent gives you a hard sell at the counter, and asks “are you sure you’re credit card covers that”?

The truth is, credit card car rental insurance alone probably won’t cover all your needs. But, for most, you won’t have to buy any additional insurance anyways. Confused? Don’t be. We’re going to offer a quick, but comprehensive primer on what car rental coverage you’ll need, where to get it and what to watch out for, so you can drive worry free.

Many Canadian credit cards come with free car rental insurance. If you have a Canadian travel credit card, you likely have it included as a key benefit. Even if you don’t have a travel card, if you’re paying an annual fee, it likely comes with car rental insurance. If you have a no fee card, free car rental insurance is not as frequent, but it does exist, so you’ll need to double check.

What You Need To Be Covered For When Renting A Car

When renting a car you’ll need to cover yourself for the following events:

  1. Damage to the rental vehicle
  2. Theft of the rental vehicle
  3. Damage to another person’s vehicle
  4. Injury to another person
  5. Loss of use of the rental vehicle while it’s under repair

Without insurance you could find yourself in significant financial trouble. It’s not the $150 scratch you have to worry about. If you’re driving in the United States, and cause bodily injury to another person in a car accident, you could be liable for millions of dollars. Hit someone else’s car, it’s on you. Crash the rental agency’s car, it’s on you (so is each day the car is in the shop). Each of those costs can spell financial ruin.

What Does My Credit Card Car Rental Insurance Cover?

Your credit card car rental insurance probably does not cover each of the 5 events listed above. However, what it likely does cover is:

  1. Damage to the rental vehicle
  2. Theft of the rental vehicle
  3. Loss of use of the rental vehicle while it’s under repair (many times, but not all times)

If you have credit card car rental insurance, you’ll likely see the term CLDI, which stands for Collision, Loss, Damage Insurance. That means your credit card car rental insurance covers you for theft and damages up to the actual cash value of the rented vehicle and valid rental agency loss of use charges. In essence, your credit card covers you for any damages caused to the car rental itself.

As a result, there is no need to take out the CLDI insurance offered by the car rental company, because it’s already covered by your Canadian credit card.

What Does My Credit Card Car Rental Insurance NOT Cover?

Your credit card car rental insurance likely does not cover you for:

  1. Damage to another person’s vehicle or property
  2. Injury to another person

In legal speak, your credit card does not provide insurance when you damage someone else’s car or hurt someone else, what’s called 3rd party liability.

The good news is, if you have a car of your own, your auto insurance likely already covers you for 3rd party liability, even when driving a rental vehicle in the United States and Canada (double check to see if you’re covered elsewhere). So there is NO need to take out the 3rd party liability insurance offered by the car rental agency.

However, if you do not own a car, chances are you do not have 3rd party liability insurance coverage. You will need to get some. You can usually get 3rd party liability insurance, without getting the CLDI, from the car rental agency itself or from your insurance broker.

What To Watch Out For 

There are several conditions and exclusions you’ll want to be aware of prior to renting a vehicle:

  1. You have to pay for your car rental with your credit card. However, if you are redeeming points to pay for your car rental, like with Aeroplan credit card rewards, you will still be covered (if your card is still active).
  2. You have to decline, the car rental company’s collision damage waiver insurance, to be covered by your credit card
  3. Some types of cars are not covered, such as pick-up trucks, commercial vans, antique cars, luxury cars (over $65K)
  4. Some countries may not be covered by your credit card’s car rental insurance, the United States is.  Double check before you travel.
  5. Make sure your credit card account is in good standing, or you may not be covered.
  6. Usually there is a maximum number of consecutive days you can rent a vehicle for (45 days or so).

Credit card car rental insurance can save you $15-$35 a day, nearly the cost of renting the car itself. So before saying yes to the high pressure pitch from the sales clerk at the car rental agency, check your credit cards to see if you’re already covered and for what.

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