Some second thoughts on car rental insurance

It may be time to rethink the long-standing recommendation that travelers should rely on their regular insurance, plus a credit card policy, for collision coverage rather than buy the rental company's obscenely priced collision/loss damage waiver (CDW). Although most other consumer travel writers and I still stick to that general principle, I believe that senior travelers should take steps to minimize the risks.

This column was prompted by the responses I received from several independent insurance agents when one of my syndication papers recently re-ran an older column on rental cars. Although these agents have no stake in selling CDW, they cited several problems that travelers face when they rely on their own resources to cover collision risks:

• Many personal insurance policies have limits on rental car coverage that are far less than the amount at risk in a severe accident.
• Most credit card coverage is secondary, meaning it pays only what's left after you first submit a claim on your own insurance.
• Regardless of the amount, a claim against your regular insurance policy would almost surely result in raising your annual premiums.
• Rental car companies keep adding new cost elements to the damages you owe when you have an accident—loss-of-use charges (even when the company had plenty of other cars available at the time), administrative fees in addition to actual losses, claims for full replacement value when a rented car is heavily damaged, and such—charges that might not be paid by either your regular insurance or your credit card.
• Even if you eventually recover the costs, going through a claims process on a rented car can be a major hassle, and demands for immediate payment could max out your credit card.
• Your regular insurance doesn't cover you outside the United States, and your credit card might not, either. (The latter is false; American Express and Diners Club cover you in most countries; and if your MasterCard or Visa covers you in the United States, it also covers you in most foreign countries.)

All in all, several of these agents recommend that their clients buy CDW. While admitting that the prices—$15 to $30 a day—are outrageous, they believe the risks of not buying are too great.

Although I respect the views of these knowledgeable folks, I still believe in avoiding the CDW gouge. But I do recommend two ways to limit the risks:

Use (or switch to) a credit card that offers primary rather than secondary collision protection. That includes all Diners Club cards, but only a few MasterCard and Visa cards. Although American Express coverage is nominally secondary, you can sign up for a program that raises that protection to primary: "Premium Car Rental Protection" provides primary collision/loss coverage for rentals up to 42 consecutive days (30 days for Washington residents) at a flat rate of $19.95 per rental ($15.95 for California residents).

If you're an AARP member, rent from a company that will cap your total exposure, even when you don't buy CDW. The caps are $3,000 with Alamo or National or $5,000 with Avis, Budget, Enterprise, or Hertz. To qualify, you must use the rental company's code for AARP rates when you reserve. See AARP.org or call 888-OUR-AARP (888-687-2277) for details. This code also provides for modest discounts, but I recommend using the AARP rate, even if some other discount is a bit better.

Overall, you still face the risk that your credit card company won't fully cover all of the charges the rental company might try to pile on the damage bill. But CDW is such a gouge that, on balance, I believe the combination of primary coverage and AARP damage caps reduces the risk enough to rely on the credit card. But you might well disagree, and buying CDW certainly removes virtually all the risk. It's your call.