Avoid overpriced rental car insurance

If you rent a car during your summer vacation, the agent at the rental counter may try to sell you "insurance." Most of you probably don't need any extra insurance, but if you do, you'll have to buy it. Here's a quick refresher course in what travelers do and do not need when they rent cars.

First, the fundamental rule: Never drive a rented car (or any other) without two basic kinds of insurance: Collision insurance covers damage to the car you're driving, and liability insurance covers your financial responsibility if you hit someone else.

Collision

Although you definitely need coverage, chances are good that you can get coverage without paying anything extra. Driving in the U.S. or Canada, your own regular auto insurance may cover you in a rented car at no extra cost. Even if it doesn't, with the proliferation of "Gold," "Platinum," and other premium options, there's a good chance that your credit card provides collision coverage at no extra cost, provided you use the card to rent the car. As long as your regular insurance or your credit card covers you, you don't need the rental company's "collision damage waiver" or "loss and damage waiver." And that means not wasting up to $25 a day. Before you leave home, just make sure your auto policy or credit card covers rental cars.

The situation is only a bit different in Europe. There, your regular auto policy probably doesn't cover you. But except in a few countries, your credit card does. Check your card's fine print, and buy the rental company's waiver only when you rent in a country your card doesn't cover.

Liability

Credit cards do not provide any liability coverage whatsoever. And in the U.S., the rental companies have successfully lobbied most states into allowing them to rent cars with only an inadequate minimum liability coverage—or none at all—included in the base rate. Fortunately, with a rental in the U.S. or Canada, you probably enjoy liability coverage through some combination of your regular automobile, household, or "umbrella" insurance. Check your policies.

Many U.S. liability policies no longer cover you when you drive in Europe. Fortunately, most European rentals from major suppliers include generous liability coverage in the basic rental rate. But be sure of adequate coverage before you rent: You can usually ferret out the amount of coverage from a rental company's website, and specialist agencies such as Auto Europe make sure you know.

Wherever you rent, if you aren't covered for liability in a rented car, you'll have to arrange insurance during the rental. You can buy liability coverage by the day from a rental company: It's overpriced, but overpriced insurance beats the huge risks of driving without liability coverage.

Other insurance

Beyond collision and liability, any other insurance the rental company offers you is likely to duplicate coverages you already have. Personal effects insurance is usually an unnecessary duplication, because your regular household policy probably covers your personal effects even when you're on vacation. Accident insurance ("ADD," sometimes called "safe trip") from the rental company is a poor buy: If you really need it, you need it full time, by the year, rather than just when you're renting a car. I recommend against ADD totally, but if you like the idea, buy a year-round policy instead.

Automatic acceptance

Most standard rental contracts list all four types of insurance, and whenever you rent, you should have the opportunity to initial "yes" or "no" to each. Unfortunately, some computer printouts enter "yes" as a default. You must specifically say "no" to each, even if you have to scratch out the preprinted "yes" answers.

No matter how eager you are to get out of the rental office and into your car, take a hard look at the contract before you sign it. In Europe, be especially careful that the insurance entries aren't already filled out with "oui," "si," "ja," or equivalent entries. Demand an English translation if you aren't sure what a foreign contract says.