If you're like me, once or twice a year you find it necessary to rent a car for a week or two. This somewhat painful expenditure is practically unavoidable when traveling across the country via plane or train to visit relatives or old friends. In an effort to limit this expense as much as possible you, like me, routinely decline the car insurance available from the rental company in favor of the "free auto insurance" provided by your credit card issuer. This really looks like a good way to keep from filing a claim on your personal policy and risking a possible rate increase. It has always been my understanding that to qualify for this instant car insurance all of the rental agency auto insurance should be declined. In any case, I have always assumed that I was also covered by my personal auto insurance policy even if I didn't use the insurance provided by the credit card. If this all sounds familiar to you then you, like me, will be surprised by some interesting facts that I recently uncovered.

It turns out that the rental car insurance offered by the rental car agency isn't offered all in one chunk - it is offered in sections. You may have wondered why, when you decline rental car insurance, you have to initial in more than one place. All that initialing is you declining each individual section of the insurance coverage available. Each car rental company has different combinations of coverages for the categories Personal Property, Collision Damage Waiver (CDW), and Loss Damage Waiver (LDW). The last two are the ones you should really pay attention to.

CDW coverage is pretty self explanatory - it covers the cost of repairing damage sustained in an accident. LDW is a bit different. If you have an accident and put the rental car out of commission for a week or two while it is being repaired the rental car company loses the income the vehicle would have been making if it were roadworthy. They expect someone (you) to cover that loss. At this point you might be expecting your credit card company to cover it - they won't. I verified this with a call to Discover Card. They told me that their free auto insurance coverage is valid for collision coverage only and only if you charge the entire rental expense on your Discover Card and decline the CDW coverage at the time of rental. The LDW coverage is still something you need to worry about. I called my auto insurance provider (Geico) and asked them about what coverage I could expect on a rented vehicle. The answer I got was a little fuzzy as I am not totally sure the customer service rep fully understood my questions. She said that all the expenses (CDW & LDW) would be covered under the terms of my policy (meaning I'd have to pay any deductibles) as long as I had properly filed a claim. She really stressed the "filing a claim" detail - which confused me since I don't see any other way to get a car insurance company to provide any funds. She may have been referring to the time limits involved with filing a claim - something that may expire before you get hit with a bill for the LDW.

What then is the best course of action? Before you head out on your vacation it is probably a good idea to contact both your credit card issuer and your personal auto insurance provider and be sure you clearly understand what is and is not covered. If you can, get it in writing. If you plan to waive the CDW and you are charging the entire rental on your credit card you may want to consider taking on the LDW. On the other hand, if your insurance company will cover both types of expense then it may be Okay to decline everything offered by the car rental company. I don't plan on mixing and matching by trying to get my credit card issuer to pay for the collision repairs while trying to get my insurance company to cover the Loss Damage. I'd rather enjoy a little of my vacation.