How does insurance work when renting a car abroad?
The basics
Car insurance is a challenging topic to understand whether you’re in your home country or abroad. This blogpost aims to demystify rental car insurance by answering a few key questions: what do I legally need to protect, what should I consider protecting, and what’s the best way to get the coverage I need?
What things am I legally required to cover with car insurance while renting a car abroad?
Federal laws generally require that you carry third-party liability insurance (also known as TPL / LP / LI / “civil liability”). This covers:
Damage to other people’s vehicles
Damage to other people’s property
Injuries to other people
In most cases, limited third-party liability insurance is already included in the price of the rental. However, you should always check to make sure. The included coverage is usually the minimum legal amount, so if you desire additional coverage, you may need to purchase that separately.
Note: your regular car insurance back at home usually will not cover third-party liability while you’re renting a car abroad (even if they do cover it in the US). Similarly, your credit card almost certainly does not cover this.
What things are optional to cover with insurance while renting a car abroad?
There are a range of insurance add-ons available from the rental company itself or from third-party insurance providers. Whether or not these policies are worth it often come down the personal preference. Here are some things that you may want to consider covering:
Damage to your rental vehicle
If you crash or someone hits your rental vehicle, you will need collision insurance or else you risk paying out of pocket for damage done to your vehicle. This is generally not required, but it’s highly recommended that you get this in one form or another. It’s important to keep in mind that driving abroad is often significantly more challenging than driving in your home country because rules of the road and environmental factors can be very different from what you’re familiar with at home. Here are a few ways to get collision coverage:
Collision damage waiver (“CDW”) / loss damage waiver (“LDW”): If you opt to pay for the collision damage waiver offered by the rental company, you will be liable to pay for damages only up to a limit (called an “excess” or a “deductible”). You are generally not liable for damages beyond the deductible unless you violate the terms of the agreement (e.g., drunk driving, damage to tires if excluded from CDW coverage). The CDW may be included in your rental automatically, though generally it’s an optional add-on.
Credit card benefit: Many travel-oriented credit cards cover damage to and theft of the rental car. For your credit card company to pick up the tab in case of damage, you’ll typically need to first decline the rental company’s collision damage waiver. You will also need to pay for the rental with that credit card. Make sure you read your credit card company’s policy closely before relying on their insurance as different cards can offer drastically different levels of coverage.
Excess waiver / “Super CDW” / Zero Excess: This is an optional upgrade to your CDW that reduces your deductible / excess to zero.
Medical coverage for yourself
It’s important to ensure that you have adequate healthcare coverage before you go abroad. Here are a few possible ways to make sure you’re covered:
Your US health insurance policy: Some health insurance policies may cover you while you’re abroad, but many do not.
Travel insurance: Many travel insurance policies cover emergency medical coverage.
National healthcare: In some countries such as New Zealand, all injuries resulting from accidents are covered by the National Healthcare (“ACC”), even for tourists. However, this insurance won’t cover things like physical therapy once you’re back in the US.
Personal Accident Insurance (“PAI”): This is sometimes offered by the rental company, but it’s not generally the best value and you’re better off with a different option.
Low-value insurance options
We generally recommend against the following types of insurance add-ons because they are often already included in other policies:
Personal Accident Insurance
Personal items insurance
Premium roadside assistance
Theft Protection
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Holders of U.S. driver’s licenses must obtain an IDP from an authorized issuer. PriorityIDP obtains legitimate IDPs on behalf of its customers from AAA and express ships them anywhere in the world. This is the fastest, most reliable way to receive an IDP while abroad.