Do you need rental car insurance?

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Rental car insurance is for suckers, right?

That's the advice I received years ago from a friend who swore that rental car insurance was simply a money grab and something no one really needs to purchase. And I've always tended to agree -- recently I rented a car for the weekend and turned down the insurance as per usual, telling the rental agent confidently that I was covered through my credit card.

But as I drove north along the highway, a niggling doubt remained. Was I really covered by my credit card? I was quite sure I had known the answer to that question at some point in the 17 years or so that I've had the card. I was pretty sure, but not positive. And if I was covered, for what?

A couple of phone calls later, I discovered that I needn't have worried -- I am covered for rental vehicles through my personal car insurance and my credit card. Damage, collision, theft, liability, fees -- the whole shebang. Paying for extra insurance at the rental counter would have been a waste of money for me. But after doing a little research, I also discovered that just because someone has personal auto insurance or a credit card doesn't mean they're automatically covered when it comes to a rental car.

For example, I am automatically covered through my credit card because I am a "gold" member. But if I was just a regular cardholder, I would not be covered for rental vehicles unless I had at some point elected to pay $29/year for rental car insurance.

Here are some other tricky factors to watch out for:

1. Check Your Limits

If you find out that you are covered for car rentals through your credit card, it's still a good idea to check what that policy includes. For example, my credit card coverage does not include third party liability for rental cars (though fortunately my personal car insurance does).

As well, even if you do have personal car insurance, it may not be sufficient coverage for your rental car. As John Bordignon of State Farm Insurance told me, "A State Farm customer's auto policy will extend to a rental vehicle in the Canada and the U.S.A., but is limited to the coverage they have on their private vehicle and, depending on the individual circumstances of a claim, subject to a deductible. For example, if you don't have comprehensive and/or collision coverage on your private vehicle, then this will not be extended to a rental." In other words, it may not make sense to you to pay for collision for your older-model sedan, but just know that means you won't have collision on a brand-new rental car either. Mr. Bordignon said it is possible to purchase additional collision coverage for rental cars through your personal insurance, so it's important to talk to your broker if it's something you think you may need.

Also check to see if other fees are covered by your credit card policy. As Investopedia.com points out in their useful post, " 8 Things You Need To Know Before Renting a Car," some credit card companies will cover damage to your rental car, but they may not cover fees assessed by the rental company. There's "loss of use," for example, which rental car companies may charge because they can't rent a dinged-up vehicle while it's in the shop.

2. Out of Country? Out of Luck

Mr. Bordignon says that a State Farm auto policy does not extend to vehicles rented outside Canada or the U.S.A., so "you might want to purchase the extra coverage from the agency for additional piece of mind." Indeed, many credit card companies will not cover you outside of the continent, so if you are planning to rent a car during your holiday excursions abroad, it becomes even more important to read the fine print.

3. No Trucks Please

The type of vehicle you rent will also affect your coverage. As an example, I found out that neither my personal car insurance or credit card coverage would cover the rental of a moving van. (My husband Sean recently rented a van in order to return a mass of unopened IKEA kitchen cabinets. Prudently, he bought the insurance at the rental desk, probably for the first time in his life). If you do plan to rent a cargo van or pickup truck, find out first whether your personal or credit card policy will cover you.

4. The Road Less Travelled

Investopedia.com points out that some rental companies prohibit the use of their cars on unpaved roads: "If you do purchase a collision damage waiver or other rental car insurance, it will most likely be voided when you drive the car on a gravel, or otherwise unpaved, road." With cottage season quickly approaching, it's an issue worth considering. My credit card company told me that gravel roads were acceptable, as long as I was travelling on a "well-maintained" road. I might run into trouble though if I decided to go off-roading in my rented Hyundai.

All in all, it's worth a call to your car insurance or credit card company before you say no to insurance at the rental counter. No one wants to pay for something they don't need. But no one wants to be left on the hook for thousands of dollars either.