Originally Posted by swingaling

Note: I’m not a lawyer, and the following is not legal advice.

Rental cars are always insured, whether or not the renter has their own coverage or buys/declines the cover from the rental agency. Rental car companies, as registered owners of the vehicles (and as a matter of prudent risk management) are compelled to insure their fleets for liability coverage at a bare minimum. They usually insure for physical damage as well.

The type of coverage they purchase is called contingent auto liability insurance, and it protects the owner of the vehicle (the rental car co) in the event that the renter has no insurance or insufficient insurance to pay for the damages they cause to others.

That said, these types of policies are typically in secondary position and can be triggered only when the driver’s policy is insufficient. Further, contingent auto liability does NOT protect the interests of the driver at all. They have no duty to defend YOU in a suit; they only owe that duty to their insured, the rental car co. If found liable and uninsured, be prepared to hire a lawyer to protect your assets.

Rental car companies also carry policies for physical damage to and theft of their cars. This protects them from instances where a renter’s policy lapses, is insufficient, etc. And it also protects their fleet vehicles from things like hail storms, thefts, and accidents that occur when the vehicles are not rented out. Deductibles can be high ($2.5k+ per car), which is why they mitigate that risk by selling CDW and putting holds on your credit card.

Bottom line: the rental car company is always covered. But if you’re renting cars in the US, be certain you have a personal (or commercial) auto insurance policy that will cover you for your liability exposure because your credit card will NOT help.

Many don’t know this, but your personal auto policy will only extend to rented private passenger vehicles. So if you think it extends to a 16 passenger can or a U-Haul truck, think again.