Insurance coverage when renting a car overseas

So, what about insurance when driving a car in a foreign country?

<begin disclaimer> I have noticed that most travel sites will admit that car rental agencies are ripping you off on insurance fees, but tell you to buy the insurance anyway. My advice is a little different — but it comes from my own experience, and could well be wrong <end disclaimer>.

As a rule of thumb, you don’t have to worry about liability insurance (the insurance that pays for someone else’s losses caused by your actions). In nearly all countries with which I have experience, the car rental agency is required to provide that insurance as part of the basic rate. Governments do not want people driving without liability coverage under any circumstances, and so they force the car rental agencies to include that insurance in the basic rate.

The limits on that insurance are set by the government, so the limits are high enough to cover most accidents you’re likely to have. That said, if you hit a Ferrari and totaled it, which is admittedly fairly unlikely, you would be in trouble.

Sometimes, car rental agencies (especially in the US, where agents are sometimes incentivized based on how much extra insurance coverage they sell), will lie to you about this point, or demand you show proof of your insurance coverage, etc., to try to get you to buy more liability coverage. There are indeed legal requirements in the US, but as I have said they require the car rental agency, not the driver, to provide liability coverage. Liability coverage is (almost always) included in the basic rate.

That’s liability. Other kinds of insurance — the kinds that pay for your losses (if a tree falls on your car; if the car is stolen; if you’re hit and the other person doesn’t have insurance; if you’re hit and your own car is damaged and it’s your fault), are trickier. Usually, your credit card will offer these kind of insurance coverages at no charge. If you suffer an accident though, all of the damages will go on to your credit card bill. (So if you total a car: $30,000 on your bill.) Then there is a resolution process, and your credit card company will decide whether to pay.

In my experience, credit card companies (my experience is with Visa) are good about this kind of resolution process, they handle it promptly (within a month or so), and they are not jerks. But it is a stressful process, and it can take a while for the check to arrive.

On my own (Visa) card it is now outsourced to a third party, Eclaims Line. If you have an accident, you need your paperwork in order, as you must provide them: a copy of the rental agreement when you take the vehicle out; a copy of the rental agreement when you return the vehicle; a copy of the accident report filed with the rental car company (usually done by you when you return the vehicle, see more below); a copy of the damage invoice (which will come after the car rental company has had the damage fixed); a copy of the police report about the accident (if any); a copy of any correspondence with the rental car company; and photos of the damage.

You don’t necessarily need to have all of this — I didn’t have an accident report for instance because the local car rental company in Malaysia didn’t ask me to do one, and it was fine.

Still, it’s cheap but stressful, and if they did decide not to pay, for instance because you were driving in a country that is excluded from coverage, you were driving off-road, you were driving after drinking alcohol (many Muslim countries have zero limits on alcohol), or you were driving a type of vehicle that is excluded (large truck, exotic sports car), then you will need to pay the bill.

There is also an annoying loophole that you can get caught in. In many cases, particularly in Europe, car rental agencies have a high-deductible insurance policy that is included in the basic rate, and covers everything. Usually this deductible is about $1,000 or so. In a way, that’s great: you get high-deductible comprehensive insurance for free.

The not-so-great thing about it is your credit card insurance may not cover any losses you might suffer if you have other insurance; and this policy, even though it’s got a high deductible, counts as other insurance. So if you have $300 to pay because you hit a hedgerow, the credit card insurance may deny the claim (in some cases: I’ve had it go both ways).

Increasingly, if you say you your credit card covers it, European car rental agencies will have you sign a special form that says you decline all the coverages that are included in their basic rate. In a way, even though that means you are turning down “free” (high-deductible) insurance, they are doing you a favor, because that means your credit card will pay because there is no other insurance.

If you do have an accident, when you get back to the rental car agency to return or exchange the vehicle they will ask you to fill out an accident form. The form is largely for their benefit. That said, in most cases you should fill it out. If you are claiming on the rental agency’s insurance, you should fill out the car rental agency’s accident form. If you didn’t buy their insurance, you don’t need to fill out their form, although it will annoy the agency personnel (they like to have the signature admitting you did it). If you think you might be able to claim on your credit card, you should fill it out — your credit card will ask for a copy of the form. Whether or not you fill out the form, the car rental agency will charge you anyway.

I have found that in some cases, for minor damage, the car rental agency will not actually charge you, even if they point out the damage when you turn it in, and say they are going to charge you. This mystifies me.

A slightly devious point, which has saved me a couple times: if you turn in the car in the pouring rain to an outdoor location (or at night, to an outdoor location), they might not see the damage.

Lastly: you shouldn’t have to think about buying extra medical insurance when you are driving because whenever you travel you should already have excellent medical insurance that covers everything. You do not want to have your relatives deciding whether to pay a million dollars to get you back to the country. They love you; but let’s not put a dollar figure on it.

Oh and really lastly: if work is paying for the car rental, get the insurance. Rip off or not, the Man can afford it.

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Taking photos is important, especially when your rental car comes pre-damaged. Photo by the author.