NEW YORK (MainStreet) — Consumers on vacation typically don't consider car rental insurance until they get to the counter of their leisure destination. This last minute thinking can result in over coverage or having no coverage at all.

"When you buy coverage from the car rental company, it's a one stop shop, which means you're paying for a variety of unnecessary fees and the price is often higher than a third party option," said Stephen Ebbett, president of Protect Your Bubble, a provider of rental car damage insurance coverage.

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In most cases, an umbrella liability policy may be cost effective because it provides protection for accidents incurred while driving an owned car or rental car. Expect to pay $200 to $300 annually for a million dollars worth of coverage.

"An owner's insurance policies may have a clause for rental cars but before relying on your personal car insurance, keep in mind that fine print may require the driver to pay a deductible depending on the policy and making an accident claim on a rental car, can increase premiums on personal car insurance the next year," Ebbett told MainStreet.

Credit cards usually cover damage to or loss of the rented vehicle but in most cases, credit card insurance benefits are secondary to either personal insurance protection or the insurance offered by the rental car company.

"Insurance benefits offered by credit card companies differ by both the company and/or the bank that issues the card as well as by the level of credit card used," said Michael Barry, spokesperson with the Insurance Information Institute (III), an insurance advocacy organization.

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In addition to personal auto coverage and credit card protection for car rentals, an emerging option is third party coverage through companies like Protect Your Bubble, which provide protection in the event a rental car is damaged or stolen for $7.99.

"A third party is often the most affordable and it also provides primary coverage so you don't have to worry about paying a high deductible or having a negative impact on your personal car insurance premium," Ebbett said.

Before travel that requires a rental, the III suggests car owners contact the customer service of their personal auto insurance provider and credit card companies.

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Some little known facts about rental car coverage include:

  • 1. Choose wisely. A platinum credit card may offer more insurance coverage than a gold card.
  • 2. Ask the credit card company to send coverage information in writing.
  • 3. Credit cards usually cover only damage to or loss of the rented vehicle, not for other cars, personal belongings or the property of others. "There may be no personal liability coverage for bodily injury or death claims on credit card coverage," said Barry.
  • 4. Personal Effects Coverage provides insurance protection for the theft of items in your car. If you have a homeowners or renters insurance policy that includes off-premises theft coverage, you are generally covered for theft of your belongings away from home, minus the deductible. If you purchase this coverage through the rental car company, it generally costs between $1 and $4 a day.
  • 5. After an accident, some car rental companies impose various fees that rental drivers may not be aware of and will be held responsible for. These fees, which can run from several hundred to several thousands of dollars, can include: towing, storage, impound fees, loss of use, diminished value and administrative services.
  • 6. Credit card companies might provide coverage for towing but many may not provide for diminished value or administrative fees.
  • 7. Loss Damage Waiver (LDW) and Car Rental Protection cover the rental car itself against damage and theft.
  • 8. Personal auto insurance protects the individual against damage caused by the car to other property or vehicles as well as medical injury.
  • 9. By law, rental companies must provide the state-required amount of liability insurance. Generally, these amounts are low and do not provide much protection. If you have adequate amounts of liability protection on your own car, you may consider forgoing additional liability protection
  • 10. LDW may become void if the accident was caused by speeding, driving on unpaved roads or driving while intoxicated.

For more information, watch this III video.

--Written by Juliette Fairley for MainStreet