Understanding Car Rental Credit Card Coverage

It is a fact that most people have a preference for using their credit cards to make payments for their rental cars. On the other hand, most car rental companies have adopted the habit of only renting to holders of credit cards from the major credit card companies; otherwise, if you wish to rent a car without a credit card, you will be required to place a substantial amount of cash as a deposit for the rented car.

Without a credit card or a cash deposit from you, a rental company will be reluctant to give out their car, since they will not be covered for any potential damage to the rented vehicle.

Credit cards come in handy in such instances, since it is not tenable that you keep traveling with large amounts of cash, especially if you are a frequent traveler. By using your credit card to rent a car, you stand to enjoy some significant savings, among other Visa card benefits. The most obvious benefit is that, if you are a major credit card cardholder, you are entitled to some form of rental car insurance to protect you, just in case the car gets lost or damaged in an accident. This kind of credit card protection is also known as Collision Damage Waiver.

This CDW may seem like a form of personal auto insurance. However, this is not entirely true since credit card car insurance is not recognized as a direct form of insurance but is considered as some sort of loss damage waiver. It is an agreement that frees you from liability if your rental car is lost or damaged under certain circumstances, provided you comply with some set conditions.

Many rental companies will offer you this informal car liability insurance at daily rates, depending on the duration you wish to rent a car from them.

Depending on your credit card issuer, you might enjoy primary protection, whereby, your credit card covers any loss or damage, thus eliminating the need for you to file a claim with your auto insurance provider. On the other hand, some credit cards will only offer secondary car rental insurance coverage, whereby, in the event that your rental car is stolen or damaged, you will be required to first, file a claim with your personal auto insurance provider, and then your credit card will offset the outstanding amount.

If your credit card offers you such protection, you will not be required to pay for a Collision Damage Waiver to the rental company; the same applies if your auto insurance also includes car rental insurance.

As a consumer, you should be careful to read the fine print in any contract. A case in point is the credit card car insurance contract and car rental contract. In the case of the car rental contract, ensure that there is no hidden clause, which automatically enlists you to CDW, especially if you already have coverage via your credit card or personal auto insurance. Make a point of declining the offer before appending your signature. As for the credit card contract, there are numerous rules and restrictions that you must understand. Therefore, you should read the credit card contract carefully to understand the conditions under which the rental car insurance coverage is valid.

Some of the facts that you should gather from the credit card contract include the kind of coverage – whether primary or secondary, the types of claims that are covered, the coverage period, administrative fees, loss of use charges, excluded countries and places, reimbursement caps, and excluded vehicles. These are explained below in detail.

Excluded vehicles: If you intend to rent a car and use your credit card’s car insurance collision coverage, first ensure that the vehicle you have chosen qualifies for the coverage. In most instances, credit card protection does not apply to luxury cars, SUVs, cargo vans, and pickup trucks.

Prohibited Countries: Most credit cards will only extend budget car insurance coverage within certain geographical areas. Therefore, it is important that you understand the countries or areas where coverage is valid and those that are prohibited.

Kind of Coverage: As mentioned earlier, your credit card may offer either primary or secondary coverage. It is important that you find out the kind of coverage that your credit offers, although most credit cards are known to offer secondary coverage, thus limiting their involvement to settling the outstanding amount after the primary insurers have paid up the claims that you filed.

Types of claims covered: Credit card companies offer a limited form of insurance, which mainly covers damage through collision and in some cases, theft. Always opt for full insurance; otherwise, if you are unfortunate to have your rental car vandalized or incur any other form of damage apart from collisions, your credit card will not cover the liability.

Administrative Fees: Find out whether your credit card covers any administrative fees that might be incurred in the form of insurance claim processing fees. If your credit card covers these fees, make sure you understand any requirements that are needed for them to honor the payments.

Reimbursement Caps: Most credit card companies have a limit on the amount of liability that is covered, with most preferring to pay whichever amount is less, between the amount set as the limit per claim, or the current market value for the car and repair costs. Some of the limits set are reasonably low, considering that some cases may require your damaged rental car to be replaced, and on top of that, the other car involved in the collision may require replacement or repairs.

The coverage period: Make sure that you understand the length of time that your credit card coverage will be valid. This is important because sometimes the period for which you need to rent a car might exceed the maximum period, for which your cover is valid.

Loss of Use Charges: Usually, a rental company will charge a fee on a daily basis, for all the days that their car will be undergoing repairs. This charge is referred to as the ‘loss of use’ fee. Find out whether your credit card coverage will settle these fees and the kind of evidence that will be required to process such a claim. The evidence, in most cases, will be the vehicle utilization logs, to prove that the said vehicle was indeed not operational within the dates contained in the insurance claim.

The car rental agreement has many similarities to the credit card contract. Therefore, you should ensure that you understand the agreement as well before you append your signature.

First, know the countries or places where the rental companies’ CDW is valid, and the exact details of the coverage, i.e., does the coverage only extend to car damage, or is personal injury and property also included. In addition, you should understand the procedure for filing claims and any applicable restrictions and limitations.

It is also important to verify from the rental company or travel agent, whether your credit card’s car rental insurance is valid in your travel destination. This is because some rental companies do not recognize credit card coverage,; you are required to sign up for CDW. In addition, the collision damage waiver is mandatory in some countries, for every rental car, regardless of whether your credit card offers coverage. Also, pay special attention to the countries you are allowed to drive in because violation of terms automatically voids the rental agreement’s auto collision insurance.

Some of the leading credit card companies that offer CDW coverage include VISA, American Express, MasterCard, and Diner Club. The visa card benefits that are enjoyed by cardholders include CDW reimbursement for all damages and theft to your rented vehicle, including administrative and loss of use charges, if you are found to be liable.

American Express credit card cardholders enjoy the services of American Express insurance and American Express car rental discount, which ensures you are reimbursed for all charges, including the loss of use fees. The MasterCard credit card, on the other hand, may or may not offer CDW, depending on who is issuing the card. Some issuers, such as the Bank of America MasterCard, offer CDW, but the coverage does not include the reimbursement of loss of use.

Finally, you must understand some implications of using your credit card to rent a car. For instance, your credit will be significantly reduced due to the fact that the rental company may, in anticipation of any eventuality and charges, place a ‘hold’ on your credit card.

The amount that is placed on hold is subsequently frozen by your credit card company, hence the limit on your credit line. To prevent any complications, ensure that any issues arising that may affect your credit card are sorted before leaving. In this regard, make a point of reporting any accidents to both the renter and credit card issuer in time and returning the rented car early enough, to facilitate processing and billing, so that you have sufficient time to sort any disputes or file CDW claims.