The USA is designed to be explored behind the wheel. The freedom to hit the highway on an epic road trip or explore your chosen destination independently makes renting a car in the USA a popular choice. However, getting behind the wheel of the car in the USA is not only a cultural experience but adds a certain amount of responsibility. As a foreigner renting a car in the USA it is important to know you are covered should the worst happen.
Insurance options when renting a car in the USA as a foreigner is like stepping into the wild west. There is no clear law or set of guidelines that will keep you protected. A patchwork of insurances and waivers combine to cover you from damages and theft to personal and third party injury. It is important to know what you actually need in advance rather than be bamboozled into paying for what you don’t need at the rental counter.
I know most people would rather stick pins under their fingernails rather than read pages of insurance fine print. So this step by step guide should keep you better informed, better protected and also save some money. You can then sit behind the wheel with the confidence you are covered.
Disclaimer: This is provided as general advice and I encourage you to check the specific policies you take out relevant to your personal circumstances. This information simply comes from my own personal experience and research.
Having a valid driving licence and permit
First things first, you need to check you are eligible and covered to drive a car in the US. Most national rental companies in the USA (think Alamo, National, Thrifty, Hertz, etc) will rent a car to someone over the age of 25 with a license from their home country. Smaller independent rental companies may have some issues with foreign licences. But, for the most part, to drive a car, this is all you technically need.
However, even though the rental company hands you the keys doesn’t mean you’re officially licensed. The police may wish to see more than just your foreign license. Also, to ensure you are covered medically in an accident where you are the driver at fault, most travel insurance policies require you to be licensed for the vehicle you are driving in both your home country AND also in the USA.
Apart from sitting a driving test in the USA (much too complex for short visits), the only other thing that will extend your driving license to the USA is an International Driving Permit (IDP). I was sceptical of these for years until I read the fine print on my travel insurance policy. For instance, if you are hiring a motorbike or scooter in the USA you also must have a motorcycle license in your home country.
Travel Insurance & Car Rental
Getting travel insurance is almost essential for travel to the USA regardless if you are are driving or not. In terms of car rentals though, travel insurance really only comes into play to cover your own personal medical expenses in case of an accident. Still, there are a few other minor covers to check, including:
- Excess coverage (known in the US as the deductible) on Loss or Damage Waivers (LDW). The cover is usually between $3000-$5,000. Note: you will actually have to take out an LDW for this to apply!
- Return of your rental car in cases you are physically unable (cover for around $500); and
- Personal effects in the vehicle from damage or theft (any high-value items will need to be called out separately).
Loss or Damage Waiver (LDW)
What is it?
A major moneymaker for car rental companies is the Loss or Damage Waiver (LDW) or Collision and Damage Waiver (CDW). The waiver isn’t insurance as such but it prevents the car rental company from chasing you for payment to replace or repair of the car should it get stolen or damaged. The cost of the LDW through the rental company is almost triple the cost than if you get this separately ahead of time. Instead of paying an additional $30-40 per day for this you can easily pay just $10 a day by planning ahead.
How do you get it?
Car rental aggregators (think Expedia, Priceline, Kayak etc) all offer the LDW as an add-on service when you book online. So compare rates across all of these and other insurers (this is usually between $8-$12 per day) and also check how they calculate ‘days’. Some count days the same as your rental period, others charge based on calendar days, meaning a 5-day car rental could require 6 calendar days of cover. The actual waiver is provided by an insurance company, not the aggregator site, nor the rental company. Some credit cards claim to provide LDW coverage. Check the fine print very carefully (refer to the specific credit cards section below).
When will you need it?
You will need to use the LDW whenever you cause damage to the car or if it gets stolen. Make sure you have the contact details and policy number of the actual provider of the LDW close to hand. You may need this when you pick up the car and if you need to make a claim. Remember, your travel insurance may already cover the excess (deductible). If it does, you can perhaps get a cheaper daily rate in exchange for a higher excess.
Supplemental Liability Coverage
Supplementary Liability Coverage, as the name suggests, is additional. For a registered car rental company in the US, they must provide a minimum level of liability protection for cars they rent out. This will partly cover people injured and property damaged as a result of an accident you cause, up to a certain limit. The amount of cover provided by the rental company is the minimum required by law in each state (it varies greatly but on average about $80K) so it may not be enough to cover all costs in a major accident. See a list of the minimum personal liability coverage by state.
To be completely protected, supplemental liability coverage will provide this, often up to a $1 million. As a foreigner, this insurance is only available through the car rental company directly and costs an additional $15 per day on average.
Your travel insurance will not cover Personal Liability for a rental car!
It is important to be aware that your travel insurance DOES NOT cover personal liability insurance for car rental accidents where you are the driver at fault. This is a little-known fact and normally hidden deep within the fine print. Look for the clause surrounding personal liability. It will usually have a statement saying personal liability insurance excludes situations where you are in charge of a ‘motorised vehicle’. This broadly means rental cars.
Supplemental liability coverage is a personal choice and probably the most difficult decision on cost vs benefit. You are covered to a point but having the supplemental coverage might be a good idea in the US when medical and liability costs could be extremely high. You are also driving in unfamiliar territory, potentially on the opposite side of the road and with a few new road rules to master.
Personal accident insurance
This cover protects the driver in terms of their own medical expenses in the event of an accident. This is mainly designed for US citizens that don’t have personal health insurance. Cover usually costs about $7 per day and is sometimes combined with personal effects insurance. As a foreign tourist, your personal travel insurance should cover you for this.
Personal effects insurance
This covers your luggage and equipment in the vehicle from theft or damage and is usually bundled with personal accident insurance (see above). As a foreigner travelling the USA with travel insurance, your travel insurance policy should cover most items. If you want to cover high-value items, it is better adding these items to your travel insurance policy for your entire trip rather than taking out personal effects insurance just with the car rental.
For breakdowns, lost key replacement, or if you run out of fuel the rental company will offer you coverage for coming to your rescue at no cost. This may give you peace of mind, although the likelihood of this occurring is low, plus the rental company will still come to your rescue, they will just charge you a fee. Unless you are known for losing keys, running out of fuel etc you can probably run the risk of not getting this and simply wear the cost should this occur.
What about credit card insurances?
Credit card companies are good at one thing, selling credit cards! Travel insurance and car rental insurance are often thrown in the marketing collateral to entice you to in. Before relying on insurance provided by your credit card company check the fine print VERY carefully.
You usually need to pay for the bulk of your trip using the relevant credit card to validate the travel insurance policy. The car rental insurance rarely extends to the US and if it does it will likely only apply to the Loss and Damage Waiver.
Summary of Insurance Cover for Renting a Car in the USA
Ok, you’re all set! The above steps should have you on the straight and narrow when you are renting a car in the USA. Enjoy the open highway and post any other USA driving or car rental tips you might have in the comments below.