First and foremost CC offer vehicle rental insurance for the same reason many other benefits such as extended warranty protection; to encourage holders to charge something (in this case car rental) on whatever card.

On both sides credit card companies earn from each transaction; the holder will pay interest (unless they are of the small number who pay off all charges in full each month), which provides income. Vendors (in this case the car rental company) will pay transaction/merchant account fees.

Multiply the above sums by the millions of Visa, MasterCard, Discover and Amex card holders then look at how much each actually pay out in claims. It is almost certain the latter is much less than former.

Consider someone with "average" credit score and carries a balance of say $3k and rents a vehicle at Christmas 2014 for a total of say $200. The only way to pay off that $200 on most if not all credit cards is to pay off the entire $3k ( now $3,200k) balance. Otherwise it could take years (at minimum payment amount) to finally retire that debt. By that time the CC has earned (depending upon interest rates) a very nice sum on that rental. Again lather, rinse and repeat by thousands of customers doing the same day in and out.

Then there are all the "gotchas" including those listed above.

CC insurance is often secondary to whatever insurance the already has. That limits claims to those who do no own a vehicle and or have other coverage. Even then the coverage from CCs is not always all inclusive and comes with various limitations.

Renter must *decline* whatever insurance is offered by the car rental company *and* pay for the entire rental with whatever credit card. So if you reserve with a gold MasterCard but pay for the rental at return with a debit card and are later hit with damage charges MC won't help.

As with everything else credit/charge card companies aren't "giving" anything away. If vehicle rental insurance proved a liability to their balance sheets it would have been phased out years ago.