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5 Rental Car Insurance Coverage Loopholes to Avoid with Credit Cards

One of the most frequently repeated bits of travel advice is to avoid being coerced into paying extra for additional rental car insurance. When you pay with a credit card, you are usually covered by the policy that is included by the network that your card is affiliated with.

This advice, while generally true, glosses over a much more complicated insurance picture.

Many travelers think that they are covered by their credit card’s policy only to find out after a car accident that they were not.

Here are six common situations where you might think you are covered, but you’re really not.

1. Sorry, that Kind of Car Is Excluded

The rental car insurance that comes with your credit card has a long list of vehicles that are excluded. Many exclude exotic cars like Ferraris and Bentleys. But what about a Ford pickup truck? I once got upgraded to a Ford pickup when the company was out of the class of car I rented. Only later did I realize that my credit card excluded any vehicle with an open cargo bed or anything that may be considered a truck. Certain vans are excluded as well. Other policies exclude popular sports cars like the Ford Mustang, which are commonly part of rental car fleets.

What You Should Do
Familiarize yourself with the terms of the rental car insurance you are planning to use. Reserve a car that meets that definition and refuse an upgrade to a vehicle that is excluded.

2. No Coverage in that Country

You might not expect to be covered when you rent a car in a rough and tumble part of the world racked by violence and lawlessness, but how about countries like Italy? Since the fall of Mussolini, Italy has been a fairly peaceful place, but for whatever reason, credit cards seem to have a problem providing their insurance there, along with a few other popular tourist destinations. In addition to Italy, Ireland,  Northern Ireland and Israel are all excluded from the coverage of Visa, MasterCard, American Express and Diner’s Club.  The same is true for Jamaica, New Zealand, and in some cases, Australia.

What You Should Do
The Discover More credit card offers rental car insurance to vehicles rented anywhere in the world, except where prohibited by law. If you do not have a Discover card, or it is not accepted at your destination, you can still look for a rental car company that includes a collision damage waiver or offers car insurance for a reasonable price.

Rental Car Insurance

3. That Road Doesn’t Count

It is quite difficult to find a copy of the rental car insurance policies that apply when you use your credit card. And even if you do manage to obtain a copy, there is nothing there that excludes coverage in the event that your vehicle is damaged while driving on a dirt road. What you will find is a clause that excludes coverage any time you are violating the terms of your rental car agreement. Sure enough, virtually every rental car agreement forbids you from driving on an unpaved road. More than half of the roads in the United States are unpaved, and you can even rent a car in rural areas where almost every road is unpaved. Nevertheless, your credit card’s insurance company will deny your claim if an accident occurs on an unpaved road.

What You Should Do
Unless you can obtain written authorization from your rental car company to drive on an unpaved road, even purchasing their insurance probably will not help you. If you are renting near a national park or another tourist attraction featuring unpaved roads, there may be a local rental car company that will not forbid its use there. Otherwise, avoid all unpaved roads in a rental car or at the very least, use extreme caution.

4. No Coverage with a Loyalty Award Program

I am big fan of loyalty programs and award travel, but I will never redeem a rental car award. The key to the rental car insurance from your credit card is that you must reserve and pay for the entire rental using your card. If you redeem an award for a free rental from your airline program or even the rental car company itself, and you are on your own.

What You Should Do
Save your points and miles for airline tickets or hotel rooms, as the cost of added insurance will negate the value of the reward.

Loyalty Award Program

5. Congratulations, You Are Covered, But..

You’ve avoided renting a pickup truck in Jamaica with your frequent flier miles so that you can drive off road, but you still had an accident. You paid for your compact car with your credit card and it was damaged on a paved road, here in the United States.

Think you’re off the hook? Don’t get too comfortable with that insurance agreement.

The rental car company will still try its best to hit you up for administrative fees and loss of use. They will stand by the fictitious idea that all their cars are rented out all of the time, and renting out a car with a ding in the door is just not possible. So, each precious day that they can claim they weren’t renting out their valuable car, they will bill you for their highest rental rate. Then, they will add hundreds of dollars of administrative costs. If you’re counting on your credit card company to cover those charges and jump to your rescue, you might be shocked when they shrug their collective shoulders and tell you that those charges are not covered.

What You Should Do
Not every credit card company excludes loss of use and administrative fees. Visa’s contract does appear to cover such charges. Otherwise, you may consider such charges to be the deductible that you will be responsible for, in the event of an accident.

Final Word

Despite all of these scary exclusions that I have discovered, I have yet to be a victim of any of them, as I have never actually damaged a rental car. That said, I’m sure my day will come.  And when it does, I hope that I will have enough knowledge of the way credit card insurance coverage works, so that I won’t be denied my claim.

Have you been denied a car rental insurance claim from a credit card company? Why was your claim denied? Do you have a favorite insurance coverage from big name credit card companies? Share your thoughts and experiences in the comments below.

Jason Steele is one of the nation's leading experts in credit cards and travel rewards since 2008. Jason is also the founder and producer of CardCon, which is The Conference for Credit Card Media. Jason lives in Denver, Colorado where he enjoys bicycling, snowboarding and piloting small airplanes.

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