Whether you’re on a business trip or on vacation, you may have heard the question that car rental companies typically ask; that is, if you want additional insurance for your rental car. You may say yes and buy it out of fear or decline, believing you are covered for rental car purchases. However, the reality is that unless you look up your current auto insurance policy and see if you’re covered, you really won’t know and you may lose out on some savings. So it’s always a good idea to call your insurance agent to get the details of your policy.

Normally, there are two cases in which you are covered by car insurance for a rental car. Both ideas have their pros and cons.

Have an auto insurance policy. Some insurance companies also extend their coverage to rental cars, as long as you’re taking a leisure vacation, so be sure to ask your insurance agent about this. But know that any coverage gap you have in your policy will also extend to your rental car. And if you’re traveling for business, you’ll need to have your employer pay for the insurance, since your auto insurance policy won’t apply.

Have auto insurance protection with a credit card company. Some credit card companies may provide protection for cars that are rented with their credit cards. While coverage varies by credit card company, the terms and conditions of your policy may change from time to time. However, insurance protection typically only covers physical damage to the car; it generally does not cover personal injury, liability, or theft of personal belongings.

Types of Additional Car Insurance Coverage for Rental Services

If you know that having additional coverage fits your situation, know that there are generally four common insurance options offered by most car rental companies:

Collision Damage Waiver and Loss Damage Waiver (CDW and LDW). Pays if you lose your rental car due to theft, or if it is vandalized or damaged in a collision.

Personal Accident Insurance (PAI). Pays your medical costs due to a car accident in your car rental.

Supplemental Liability Insurance (SLI). Gives you up to $1 million in extended liability coverage.

Personal Effects Coverage (PEC). Pays for any personal belongings of yours stolen from your rental car.

Some things to consider with car insurance

Here are some tips to keep in mind when determining if you want to add additional coverage to your car rental:

Don’t buy the same coverage twice if you have an auto insurance policy unless you have gaps in coverage.

Talk to your auto insurance agent before you decide to purchase additional auto insurance for your car rental.
Ask the car rental company for a copy of their insurance policies.

Compare the company’s price to auto insurance quotes in your area to see which is better.