Fact or myth: your credit card offers you good car rental insurance?
Published: June 5, 2021
You should consider that your credit card may not offer sufficient car rental insurance coverage and I suggest you look into a separate car rental excess insurance policy. I decided to dive into this more and research some top credit cards to see what they offer. I have chosen some “high end” (big annual fee) credit cards for my comparison as you would expect that the higher the fee, the better the insurance. We can then infer that if the high end credit cards aren’t cutting it, then neither are the low end credit cards. For the purposes of this discussion, I am also directing this conversation at United States citizens or greencard holders living in Europe who may rent a car in either Europe or the United States. The part about United States citizens or greencard holders is relevant as they are generally the only ones eligible for the credit cards mentioned below. They are also my audience that reads this blog.
Conclusion: mostly a dangerous myth for American expats.
You are renting a car in Europe: your credit card is usually good enough
most credit cards will cover damages to just your car
double check that your personal medical insurance or travel insurance covers you in case you are injured
your credit card comes with no extra frills
public liability (bodily injury or damage to property to all other parties) is covered usually to an unlimited level by the rental agencies by law (double check before you rent)
You are renting a car in the United States/Canada: your credit card is insufficient
most credit cards will cover damages to just your car
your health insurance back home in Europe will usually not cover you in the US (or only covers you up to the costs you would have incurred in your home country which will be wildly insufficient with the US healthcare system) so you need really good travel insurance that includes medical coverage in case you are operating a motor vehicle
your credit card comes with no extra frills
public liability (bodily injury or damage to property to all other parties) is sometimes covered by the bare minimum required by law (depending on the state/province) which is dangerously insufficient in the United States (usually $25,000) so you need a really good supplemental insurance protection in case you are in an accident with other people/objects
even if you have car insurance for your personal vehicle in your home country in Europe, this usually follows the car and not the person
Your solutions for renting in the United States/Canada are instead as follows:
You should research a car rental excess insurance policy, annual multi trip with worldwide coverage, which costs less than $200 per year for peace of mind and coverage where your credit card fails to deliver
Look at all those amazing extras in the table below! I have been using car rental excess insurance policies for years. I buy the annual multi trip policy so I can set it and forget it. I used to use GlobeLink but they stopped issuing new policies and I have not selected a new provider since Covid hit and I travel less. Most companies that offer these are UK based and are trying to restore service to EU resident companies but it is taking time.
You have two website options for booking a car in the United States/Canada:
The European version of the website (like budget.nl or alamo.nl for example).
So long as you use a European issued drivers license then you can rent from these websites and many will include the liability insurance up to $1M in the price of the rental. If you do not have a European issued drivers license it is usually a violation of the Terms of Service to use the European version of the website.
The United States/Canada version of the website (like budget.com or alamo.com).
You would use this in case you only have a United States/Canada drivers license. In the case you rent from these websites, you do not get anything more than the state minimum liability insurance and need to supplement.
This means that borrowing a car is out of the question, either from friends or from Turo (for example, or other ride sharing websites). This is because insurance in the United States follows the driver and not the car so unless your friend adds you to their insurance as a second driver then you are not covered. Car sharing companies like Turo rarely offer sufficient insurance protections as part of the price (described in this blog, usually only offering the state minimums).
Car Rental Insurance Basics
So when you are renting a car, there is a lot of jargon that different companies in different countries use. For the sake of discussion, we are going to use plain language terminology for comparison. When renting a car you need to consider protection from the following depending on your risk appetite:
Your Car: Accident - Damages to the car you are driving in case of an accident (actions you were involved with)
Your Car: Theft or Acts of God - Damages to the car you are driving in case it is stolen or hit by hail (actions you were not involved with)
Your Car: Loss of Income - This is income that the car rental agency loses out on while the car is being repaired
Your Car: Property Inside - Damages to property in your car in case of an accident or the car is stolen (like your guitar gets smashed or stolen)
Other Property You Hit (“public liability”) - Damages to the other car or other property (like a window or bike) you hit in case of an accident
Medical: You - Injury to your body in case of an accident
Medical: Others in Your Car (“public liability”) - Injury to other bodies in your car in case of an accident
Medical: Anyone Else (“public liability”) - Injury to bodies in the other car or pedestrians on the street in case of an accident
Misc Cover (“the frills”) - Miscellaneous coverage such as:
Chips to the windshield
Putting the wrong fuel in the tank
Losing keys or getting locked out of your car
Flat tires
Breakdowns
Damage to undercarriage (like from rocks or scraping speed bumps)
Mechanical breakdown and towing
But I have my own car insurance…?
In the United States, it is very common for car insurance to follow the person and not the car. Which means that if you have your own personal car in the United States, which is insured, then when you rent a car you are also insured by your personal insurance.
In Europe though, it is the standard for car insurance to follow the car and not the person. That means that if you live in the Netherlands, you have your own personal car, which is insured, then when you rent a car you are by default not insured and need to either use a credit card, buy insurance at the desk, or buy a car rental excess insurance policy.
Let’s Compare
Credit Cards
Versus car rental excess insurance, annual policy
Insurance4Hire as an example (for residents of Germany, Italy, France, the Netherlands, Spain, Sweden, Ireland, the United Kingdom, Isle of Man or Channel Islands)
Results:
* In the United States, damages to other people and other property (cars or objects you might hit) or “public liability” insurance, is not included in the rental price of your car. Or if it is, then it is the absolute state bare minimum (which is grossly insufficient). However in Europe, rental car companies are generally required by law to carry heavy public liability insurance as part of the rental price of your car. So even where credit cards do not cover damage to third parties, it may not be necessary to purchase extra liability insurance when renting in Europe unless you like the extra peace of mind. But when renting in the United States, having extra liability insurance is an absolute must. As you can see in the table, most credit cards do not carry any level of public liability insurance.
Additionally, though most credit cards and car rental excess insurance policies do not cover medical care to you in case you are hurt, you would supplement this with your own personal health insurance coverage. Keep in mind that if you live in Europe, many health insurance policies say that you are covered while traveling in the United States for medical coverage, up to the cost you would have incurred if you had needed medical coverage while at home in Europe. As the United States health system is deeply flawed and can bankrupt you, then you could end up with a huge bill if you solely rely on your personal health insurance coverage. You should look into travel insurance that includes medical coverage in the case you are in an accident while operating a motor vehicle.
Examples: Renting a Car
So with the above information let’s cover three scenarios:
1. You are in the United States. You are driving on icy roads. You slide off the road and into a ditch. You are physically ok, and so are your passengers. You did not hit any other people or property but you have badly damaged the body of the car.
Conclusion: using your credit card with car rental coverage, you should be covered. Your credit card is sufficient for this scenario because no other property was damaged and nobody was hurt.
2. You are in the United States. You swerve to avoid hitting a child that just ran into the road. You hit and total an expensive and brand new Audi. This accident seriously injures both you and the person inside of the Audi.
Conclusion: using your credit card with car rental coverage, you would be screwed. Your credit card would only pay damages to your rental car. Your rental car company probably had the state minimum liability coverage for your car of about $25,000. The damages to the Audi could take up the $25,000 alone. The medical bills of the person you injured could quickly climb past $100,000. You are now on the hook for all costs above $25,000. Getting in an accident in the United States is expensive, and many people who live there carry liability insurance in excess of $1M to protect against lawsuits that are highly popular in the United States. Additionally, if you didn’t get travel insurance with medical coverage in the United States while driving automobiles then you would also be on the hook for your own emergency room visit and excessive medical bills. Remember that even if you already have car insurance in your home country (somewhere in Europe) it is unlikely that it covers you in a rental car since insurance in Europe generally follows the car and not the driver.
3. You are in the Netherlands. The rest of the facts are the same as example 2.
Conclusion: using your credit card with car rental coverage, you should be covered. Because you live in Europe somewhere (mentioned at the beginning of this blog) then you should have medical coverage that should insure you for injuries sustained in an automobile accident. Additionally, most European car rental agencies are required by law to carry very substantial public liability insurance coverage as part of the car rental price - the people and property that you hit should be protected through the car rental agency. This means that renting a car in Europe generally just requires buying insurance for damages to the car you are renting. Remember that even if you already have car insurance in your home country (somewhere in Europe) it is unlikely that it covers you in a rental car since insurance in Europe generally follows the car and not the driver.
But why do all the other blogs tell me I can get coverage through my credit card??
They are written for US citizens or residents that are residing in the United States. Car ownership is very popular in the United States therefore most people living in the United States already have primary insurance coverage through the personal car that they drive. Additionally, that insurance follows them personally rather than following the car.
They are sponsored by or otherwise receive a commission from the credit card companies they write about.
Those bloggers are actually telling you the same thing I’m telling you, but they make it an after thought after they pitch you the sale. They seem to recklessly ignore that if you were to get in an accident that scenario 1 above is the least likely to occur. In 2019 inside of the United States, there were $98 billion of losses incurred for liability (damages to other people or other property) compared to $62 billion of losses incurred for physical damages (to your own vehicle) - source. It is clear from these statistics that liability (damages to other people or other property) is far riskier business than the damages to your own vehicle. Yet bloggers about car rental insurance treat it as an afterthought.
Disclaimers
I am not an insurance agent. This is not financial or insurance advice, no predicted outcomes discussed in this blog can be guaranteed. This blog is for entertainment purposes only to illustrate how dangerous it can be to rely solely on credit cards for car rental insurance. The moral of the story is to read the fine print of everything. I do not endorse any product written about in this article. Products are mentioned for illustration purposes only and are based on my personal experiences as an expat/immigrant living and traveling in Europe and the United States. This blog was current as of 5 June 2021 and may be out of date by the time you read it. The point is: read the fine print and just buy the annual car rental excess insurance policy for peace of mind. Nothing in this post is sponsored and I have no connection to any businesses mentioned here. Did you find any mistakes or has anything changed since I posted? Please get in touch with me and I will update it! Do you disagree with my assessment? Let’s have a virtual coffee and debate it!
- Jessalyn
