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TPG Contributor Jason Steele takes us through the basics of insurance that credit cards provide for car rentals and how you can make a decision about which card to use for the best coverage for your particular needs.
When we think of credit card rewards, we usually think of points and miles. But one of the most valuable benefits of a credit card is the auto rental insurance.
The problem is that these policies are sometimes very poorly disclosed, if at all. Here are some of the important terms that you should be aware of:
Collision Damage Waiver (CDW): This coverage waives the right of the rental car agency to pursue the renter for damages. This is the coverage most commonly found on credit cards’ rental insurance policies. This may have a deductible. These waivers may cover theft, vandalism, or other damage. However, in most cases, it does not cover loss of use, administrative fees, and the deductible, typically $500.
Primary vs. Secondary insurance. Primary insurance provides coverage immediately to the driver while secondary coverage only applies after any other coverage, such as your personal automobile insurance policy, has been exhausted.
Here are the rental car insurance policies of the major credit card issuers.
American Express Personal Cards Standard Coverage
Consumer cardholders receive secondary CDW coverage around the world except for Australia, Ireland, Israel, Italy, Jamaica, and New Zealand. Coverage is for as long as 30 consecutive days. You can find the specific policy for your card here.
For example, the policy for the Premier Rewards Gold card can be seen here. This is secondary coverage that only applies to cars with an original manufacturer’s suggested retail price of $50,000 or less. It also excludes a variety of sports cards and full size SUVs. Coverage is valid for 30 days.
American Express Business Cards Standard Coverage
American Express business cardholders receive secondary CDW coverage only within the United States, its territories and possessions. Within the United States, coverage is for as long as 30 consecutive days. You can find the specific policy for you card here.
American Express Premium Coverage
This is an option all American Express cardholders have for a flat fee of $24.95 ($17.95 for California residents) per rental period, (not per rental day). While this coverage also excludes Australia, Ireland, Israel, Italy, Jamaica, and New Zealand, it is considered primary coverage, meaning you won’t have to file a claim with your insurance company.
The coverage is for up to $100,000 of primary coverage for damage or theft and accidental death or dismemberment coverage ($250,000 for California residents), up to $15,000 for excess medical expenses per person, and up to $5,000 for excess personal property coverage ($15,000 for Florida residents).
There is also no deductible for this coverage. Cardmembers enroll once and then this charge is added to all rentals. You can read the details and enroll here.
There are several differences in coverage depending on which type of MasterCard you use. Gold and Platinum MasterCards offer secondary coverage for rentals of up to 15 days that excludes Ireland, Israel, and Jamaica.
It has been reported that the CDW coverage for Sapphire Preferred MasterCards, which are World Mastercards, had no territorial exclusions (most Sapphire and Sapphire Preferred cards are issued as Visas). At first MasterCard’s public relations contact indicated to me that all World MasterCards and World Elite MasterCards such the Chase Ink Plus and Ink Bold, offer a primary insurance policy for 30 days with no territorial exclusions.
However, when I called Chase customer service and asked them to confirm that this coverage applies to my Ink Plus and Ink Bold World Elite cards. I was told that their policy is only available to cardholders upon request and to receive a copy of my policy, a physical copy had to be sent by mail. UPDATE: As of June 2013, Ink cards are now Visa Business Cards and are no longer World MasterCards so the same benefits do not apply.
A week later it arrived in the mail, and sure enough, these World Elite MasterCards have the same territorial exclusions of most other MasterCards, specifically Ireland, Israel, and Jamaica. Again, I went back to MasterCard’s public relations and was told: “The coverage provided on your Chase Ink Bold World Elite MasterCard was not purchased through MasterCard (we permit issuers to purchase CDW coverage from alternate providers). So, if you have additional questions or had a discrepancy related to that coverage, you would need to follow up with the issuer.”
So in fact, you always need to request a copy of the insurance policy directly from the card issuer to know exactly what is covered and what isn’t. For example, my Ink Bold and Ink Plus World Elite MasterCards have primary insurance with the usual exclusions for sports cars, trucks, and vehicles driven off road.
Visa cards feature rental car insurance that cover renters for 15 consecutive days within the United States and up to 31 consecutive days in other countries. The territorial exclusions are Israel, Jamaica, the Republic of Ireland, or Northern Ireland. This is secondary coverage and is somewhat well documented here.
When you pay for a car rental with a Visa Signature such as the Sapphire Preferred, British Airways Visa, the Southwest Plus card or the Citi Hilton HHonors Reserve, Visa provides secondary insurance with a policy that covers eligible collisions and vehicle theft. For instance, if you rent a car in your home country and it gets stolen, or you get in an accident, Visa will reimburse you for the damages up to the actual cash value of most vehicles. An important side note: if you’re renting an “expensive or exotic automobile” (like a Porsche or Aston Martin), an automobile that’s 20+ years old, or a van that transports more than 8 people, the waiver benefit doesn’t apply. You can find further details at Visa Signature’s comparison of credit card rental car coverage.
Thankfully, the Discover card is a model of proper disclosure. Its policies for both personal and business cards can be easily found and read by non lawyers. Better yet, there are no territorial exclusions. But as you might have guessed, there are far fewer countries where Discover is accepted compared to Visa, MasterCard, or American Express. Nevertheless, Discover now claims to be accepted in many countries including Israel, Italy, and Jamaica, and New Zealand. Ireland is on their list of countries where the card will be accepted next.
- When using a Discover or MasterCard without territorial exclusions, it is recommended that travelers take a written copy of their policy when traveling to the countries that are normally excluded. For example, when making a reservation with Hertz for a car in Israel, customers are advised “If CDW is declined or not included, you must verify with your credit card company that your credit card provides full coverage for damage in Israel for the duration of rental and present a document stating the insurance coverage at the time of rental.”
- Vehicle exclusions. Many of these policies exclude a wide range of vehicles including vans, pickup trucks, and sports cars. Others exclude vehicles with suggested retail prices above $50,000.
- Compliance with terms and conditions. These policies only cover renters who comply with the terms of the rental. But these terms may have all sorts of exclusions you might not expect. For example, driving on an unpaved surface is often excluded, even though vehicles are frequently rented in rural areas or near National Parks where dirt and gravel roads are common.
- You must decline additional coverage. You cannot purchase CDW coverage and then make a claim to your credit card.
- You must pay for the rental with the card whose coverage you want. If you use points, miles, or any type of award, your credit card won’t cover you even if you use it to pay taxes and fees. If you use an award, and you sustain some damage, you may be able to pay for the vehicle with your card and decline the award. This may or may not work, and I certainly haven’t tried it myself. Thankfully, you will still be covered if you use a free rental day coupon, not an award.
If you own a car, you are required to have insurance in most states, and many insurance policies also cover you when you are driving a rental car. I spoke with my State Farm agent who informed me that the terms my policy covered me within the United States so long as the vehicle had four wheels.
So when I am in the US and when I use a rental car award, I am relying on this coverage rather than the secondary coverage I get from my various credit cards. However, when traveling abroad, I pay for my rentals with a credit card like my Ink Bold, whose coverage applies in foreign territories. Check with your personal car insurance provider to find out the terms of your policy.
How to Choose?
The best coverage is clearly the optional American Express premium policy as it has the highest policy coverage limits, the fewest vehicle exclusions, and no deductible. The price is fixed per rental, so the longer the rental, the less you are paying per day. But many people who rent just for a day or two will find that repeated cost to be uneconomical. For those people, a card such as the Ink Bold with primary coverage is the best deal. In this way, the credit card’s insurance will not be going back and forth with your personal auto insurance company, and your rates will not be affected if you make a claim.
For those who frequently visit some of the commonly excluded countries try to obtain a Chase Sapphire World MasterCard or perhaps a Discover card, if accepted where you will be traveling. Conveniently, the Sapphire Preferred, Ink Bold, Ink Plus, and Discover cards all lack foreign transaction fees. Finally, those who rent with award points or miles will have to purchase additional insurance or be content with their personal automobile insurance as your credit card only covers you when used to pay for the base rental charge. And if you use points or miles outside of the United States, you will essentially have to purchase additional insurance, so you might as well save these awards for domestic use.