If you are considering renting a car while you are on vacation, make certain that you have rental car insurance information at hand. Given that rental car insurance is a comparatively new concept for many people, you must understand the basics of the auto rental policy. Admittedly, rental car insurance agreements can be very intricate, but if you do not review the documents cautiously, you could face a serious problem should a situation arise where you are forced to file a claim.

Of greater importance to many of us in this economy is the fact that, if you do not pay attention, you could wind up wasting your hard earned money. By law, you only have to purchase liability insurance, which costs around $10 per day for rental cars. All additional clauses, including those dealing with third parties and the rental car itself, are elective, and cost of these will differ by company (and state). As an approximate estimate, if you consider the detailed coverage option, including liability, third parties, and the rental vehicle, you will most likely pay roughly $25-$30 each day.

What do all these facts really mean? Liability insurance is one of the only types of insurance that is legally required for your rental car. As you probably know, this insurance covers the third party when you are in an at fault accident. In most cases, your car insurance policy includes a liability insurance section, meaning that you actually don’t need the rental car agency’s policy at all.

In addition, it is important to remember that most credit card providers (like Visa and MasterCard) automatically offer rental car insurance if you are paying for the auto rental with that credit card. Talk to your card provider about rentals, and, if it is available in your situation, you do not have to accept the company’s rental insurance, since your car insurance covers liability, and the credit card pays for the car.

Physical damage coverage is a third coverage option offered by car rental companies, covering the rental vehicle if you are at fault. This coverage is not likely to be carried over from your individual policy, since part of it is determined by the car’s value. Case in point: if you own a $10,000 vehicle, and rent a $20,000 vehicle, it would be unwise to be in a place where they would be forced to cover the other $10,000 should you wreck the more pricey rental.

On the other hand, you should understand that the collision damage waiver agreement is not actually an insurance policy, it is a pledge that the firm will cover some damage caused by you to the rental vehicle. This implies that at an extra cost of around $20 a day, you get coverage for collision. The clause also covers the period of time that the vehicle cannot be rented out (loss of use period). An car insurance policy will not typically pay for this, so, if you do not accept collision damage insurance with the rental agency, you could be forced to cover this expense out of your own pocket.

Clearly, rental car insurance is a wise decision, whether you are taking a business trip or a family vacation. After all, why not spend $30 more a day if it offers you calmness?