Best Credit Card for Car Rental Insurance (in the US)

Normally, I rarely rent a car.  But given my planned increase in travel in 2012, I decided to take a moment to actually read the credit card insurance benefits covering car rentals and the fine print, to figure out what is the best credit card to use to rent a car.

The conventional travel wisdom that is most parroted is to decline LDW at the rental counter and use your credit card.  Some will go so far as to say the LDW insurance is an outright scam because you are already covered on your auto policy, home owners insurance, state requirements, and/or credit card insurance.   Maybe not, read onwards.

Car rental collision damage waiver insurance is probably one of the most touted credit card benefits.  All credit card companies say they offer Collision Damage Waiver (CDW), offered by the car rental companies.  At first glance this seems like a huge free benefit, until you start reading the fine print.

Which begs the question, what is the best credit card to use to rent a vehicle?

Understanding Car Rental Insurance

First, its important to know what we talking about.  All of these are optional:

  • Collision Damage Waiver (CDW).  Also referred to as Loss Damage Waiver (LDW) or Physical Damage Waiver (PDW).  If you purchase CDW from the car rental company, the company will waive all or part of the cost if the car is damaged or stolen.  This ONLY covers the rental car.  It does not cover damage to anyone else’s property or injuries.
  • Supplemental Liability Protection (SLP).  Also referred to as Liability Supplement (LIS) or Supplemental Liability Insurance (SLI).   For a fee, the car rental company will supplement the liability insurance that the company must, by state law, provide.  Consider this protection from being sued.  SLI is not offered by any credit card I can think of.
  • Personal Accident Insurance (PAI).  This insurance provides medical, ambulance and death benefits for the renter and passengers in the event of an accident.  Typically, the medical coverage is $3,500 and the ambulance benefit is under $200.  This is secondary to your primary insurance.  Totally worthless.
  • Personal Effects Coverage (PEC).  Typically provides around $500 per person of insurance coverage, with a maximum of $1,500.  Note this is secondary to your primary insurance.  Totally worthless.

However, some rental car companies will  hit you with fees if you are unfortunate to get into a car accident.  Car insurance companies claim that car rental damage isn’t a profit center, even when they get caught double dipping.  Regardless, here is a list of some fees you might get hit with:

  • Loss-of-use fee. Car rental companies charge you for each day the car was out of commission since it was being serviced.
  • Diminished value fee. The company will charge you for the depreciation in value due to the accident.
  • Administrative fee.  Ambiguous fee car rental companies claim to cover the cost processing the paperwork.
    But wait, it gets worse.  Some rental car companies add exclusions, such as one Dollar Rental Car in Washington that states that if you drive the car out of the state, all CDW protections are voided!

Understanding Credit Card Coverage (primary versus secondary)

If you credit/charge card has car rental collision coverage, you must decline CDW, and charge the rental to a particular card. 

If your credit coverage is primary, your insurance company will not be informed and the credit card company will be sent the bill.  In most cases, credit cards cover the entire bill, with some exceptions.  You insurance rates will never go up, as your insurance company is never involved.

However, if your credit card coverage is secondary (which most are), your insurance company will be contacted first and only the deductible amount and other charges not covered by your insurance company will be sent to the card. 

If you only have minimum liability insurance (or no insurance coverage), the credit card insurance becomes primary.

Note that some exclusions apply on some cards.  Citi-Professional won’t cover rentals that are not for “business purposes.”  Most cards will exclude coverage for “exotic” cars, luxury cars, and trucks.  Most exclude rentals in various countries.

MasterCard (pretty much useless), Discover, and Diners Club do not cover administrative fees.  Visa covers all fees and towing, and American Express covers all fees when the rental company provides appropriate documentation. 

So far, American Express and Visa are your best bet, as they are the only ones that pay all of the extra fees. 

American Express Versus Premium Rental Protection

American Express has two different LDW/CDW policies/programs.  One is free (secondary) which is activated by just using the covered card.  The standard protection has no deductible, covers rentals up to 30 consecutive days, but does not cover fifteen passenger vans, pickup trucks, large SUVs and vehicles over $50k in value.

They also offer a Premium Car Rental Protection policy, for $19.95 or $24.95. 

The $100,000 coverage level with a premium of $24.95 covers:

  • Up to $100,000 of primary damage and theft coverage for the rental car.
  • Up to $100,000 of Accidental Death and Dismemberment (AD&D) coverage.
  • Up to $15,000 per person of excess coverage for Medical Expenses.
  • Up to $5,000 per person of excess coverage for personal property, maximum of $10,000 for all. For Florida Residents, up to $15,000 per person of excess coverage for personal property, maximum of $25,000.

The $75,000 coverage level with a premium of $19.95 covers:

  • Up to $75,000 of primary damage and theft coverage for the rental car.
  • Up to $75,000 of Accidental Death and Dismemberment (AD&D) coverage.
  • Up to $7,500 per person of excess coverage for Medical Expenses.
  • Up to $2,500 per person of excess coverage for personal property, maximum of $5,000 for all.
  • There is no cost to enroll, and there are no monthly, annual, or cancellation fees.  You simply pay a flat rate per rental.

    Note: American Express WILL cover cars rented through opaque third party booking engines such as Hotwire and Priceline.  However, you will have to call them to manually enter rental into their system because of the way the travel transaction is coded.

So Which is Best?

It depends.  If you rent from low cost cut-throat rental companies, in the rare event you do get into a wreck you are in for some hassle no matter what route you choose.

  • If you don’t have any car insurance, then any credit card insurance becomes primary.  It becomes a moot point.  Visa or Amex are your best bet.  If you have assets you want to protect from lawsuit stemming from accident injuries, pick up the additional SLI.  Keep in mind that in some states, minimal liability is required and built into the rental rate.
  • If you only have minimal liability insurance, same goes.  Any credit card insurance becomes primary.   However, you are covered and can skip the SLI.
  • If you have full collision and liability coverage, just decline everything the car rental company offers and use your Amex or Visa premium card.

From anecdotes I’ve been able to harvest from the Internet, if you primary rent with Hertz, National, or Enterprise, American Express is hands down the best. In some cases, renters didn’t even have to submit copious amounts of forms.

    Since, we currently only have minimal liability, I’ve decided to go with the American Express Premium insurance and decline the CDW/LDW which can run $15/day or more.
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