Buying car rental insurance shouldn’t be a snap decision

Poring over insurance policies may not be your idea of fun bathtub reading, but it beats making split-second decisions on financial and legal matters at a car rental counter.

“The biggest mistake is people don’t know what they have, so they don’t know what they need,” said Pete Moraga, spokesman in Los Angeles for the Insurance Information Network of California. Moraga’s organization is a nonprofit, funded by the industry, that explains insurance to the public.

It’s not an easy subject.

Insurance relevant to rental cars may be scattered among several policies you already have for your car, health or home. Your credit card may also provide some coverage.

As a general rule, Moraga said, “if you have great insurance and a fairly new car with complete coverage, you may not need to buy any insurance at the rental counter, especially if you have a credit card too.”

But each insurance policy and credit card has its own exclusions, payment limits and other restrictions. It’s impossible for a clerk at the rental counter to know what protections you have, so it’s up to you to find out.

Rental-car contracts typically offer four types of coverage:

Collision damage waiver, or CDW; it’s also known as a loss damage waiver, or LDW.

They’re called waivers because they’re not, technically, insurance -- a fine point. Buying one means you generally won’t be held financially responsible if your rental car is stolen or damaged in an accident or other incident. Rates vary, but you can expect to pay $10 a day or more.

The waiver combines two types of coverage that are in many car insurance policies: collision (for traffic accidents) and comprehensive (for theft and other damage). If your personal policy has these provisions, you probably don’t need the waiver; if it doesn’t, you may.

Credit cards, especially premium-level ones, also may cover these claims.

But here’s something to consider: Your personal policy probably has a deductible; the waiver, depending on the type, may not. So if your deductible is $1,000 and you dread getting dinged $400 over a dent, you might want the waiver.

Another reason to buy a waiver: Some of them cover “loss of use.” This charge compensates the company for rental income it may have missed while the car was in the shop for repairs.

Insurers and credit-card companies sometimes contest this charge, potentially leaving you liable for hundreds of dollars.

In any case, don’t expect a waiver or insurance policy to cover you if you were off-roading, speeding, drunk or otherwise violating the law or the rental agreement.

You left the keys in the car, and it got stolen? Too bad. That may qualify as negligence, and also be excluded.

Liability insurance supplement. This covers you for property damage or injury to others that you may cause while driving the rental car. Payouts typically are limited to $1 million.

The supplement may cost $10 or more a day. Your personal car insurance probably will cover you here; credit cards probably will not.

Personal accident insurance. This takes care of medical and ambulance bills for you and any passengers in your rental car in case of an accident; it may also cover accidental death. Per-day charges may be $2 and up.

Your health insurance or the medical coverage in your auto policy may cover you in a rental car, according to the Insurance Information Institute, a New York-based nonprofit funded by the insurance industry.

Insurance you buy from the rental company may have strict limits. Hertz, for instance, generally caps payments at $2,500 per person for medical and $250 for ambulance costs. The caps for accidental death are generally $175,000 per renter and $17,500 per passenger, according to a summary the company publishes in a pamphlet titled “How Protected Are You?”

Personal effects coverage. Sometimes combined with personal accident coverage, this pays for personal items stolen from your car. Expect to pay $1 and up per day. Limits and exclusions vary.

If you have homeowner’s or renter’s insurance, you may be covered for loss of personal items away from home, although it may have a hefty deductible.

Everything I’ve said above applies -- in general, with many exceptions -- to the U.S.

In this country, as many as 40% of renters may buy insurance at the counter, although the figure varies widely, said Neil Abrams, president of Abrams Consulting Group, a New York-based consulting and market research firm for the auto rental and allied industries. He thinks more people buy it when abroad.

In fact, your personal insurance or credit card may restrict coverage in another country, or as with Mexico, a nation may not recognize the coverage. In that case, you’ll need to buy insurance at the rental desk there. It may be a good idea anyway.

“You’re in a foreign country; you don’t want to have to deal with problems that may arise as a result of an accident,” Abrams said. “Who needs that hassle?”

Other special situations:

Two drivers on a rental. If you have an accident, whose personal insurance pays?

Policies vary and can be complex. At State Farm, for instance, either person’s policy might cover damage to the rented car, but liability for claims by others probably would rest with the driver at the time of the accident, said Lisa Davidson, an auto claim team manager in Culver City.

You’re worried about a premium increase or policy cancellation if you file a claim on your personal car insurance. Will buying the rental company’s insurance prevent that?

Don’t count on it.

Moraga of the Insurance Information Network and State Farm spokesman Eddie Martinez said that in California, a major accident may appear in state DMV records regardless, and that could affect your rates.

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Hear more tips from Jane Engle on Travel Insider topics at latimes.com/engle. She welcomes comments but can’t respond individually to letters and calls. Write to Travel Insider, L.A. Times, 202 W. 1st St., L.A., CA 90012, or e-mail jane.engle@latimes.com.