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10 Factors That Affect Car Rental Insurance Cost
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Published in Car Rentals Category.

Rental car insurance is the most critical aspect to consider when renting a car for long or short term. Understanding the factors influencing car rental insurance costs can help you make informed decisions and save money.

Here are Some Key Factors that Affect Car Rental Insurance Cost

1. Type of Vehicle

The type of vehicle you choose has a big impact on your insurance costs. Expensive vehicles such as luxury cars, sports cars, and high-end SUVs tend to have higher insurance costs because they are more expensive to repair or replace. e.g., insuring a luxury SUV can cost up to 20% more than a standard car due to higher prices and potential maintenance costs.

On the other hand, budget cars and regular sedans tend to have lower insurance rates. Leasing an economy car like a Toyota Corolla can save 15% on insurance compared to a luxury sedan. According to rental car statistics, insurance for an average luxury car can cost $1,200 for an average week, while an economy car can only cost $600. So, choosing a simple and affordable car is a good idea to save money on rental car insurance.

2. Rental Duration

The duration of your car rental significantly impacts the insurance cost. Typically, the longer you rent a car, the more you will pay for insurance. However, many rental companies offer discounts for extended rental periods. For example, renting a car for a week might cost $100 in insurance, while renting the same car for a month could cost $300, saving you $100 compared to renting week by week. Research shows that rental companies often provide a 10-20% discount on insurance for long-term rentals.

So, if you plan to rent a car for an extended period, it’s worth checking for these discounts. For instance, if a daily insurance rate is $15, renting a car for a month might bring it down to $12 per day, saving you $90 overall. Therefore, booking a longer rental period can be a cost-effective strategy.

3. Driver’s Age

Your age is a critical factor in car rental insurance costs. Young drivers, especially those under 25, usually pay higher premiums because they are considered riskier due to their limited driving experience. For instance, a 22-year-old might face an additional fee of $25 per day, while a 30-year-old would not. According to industry statistics, insurance rates for young drivers can be 30% to 50% higher than for older drivers.

Some rental companies even have age restrictions, not allowing rentals to drivers under 21 or charging extra fees for those under 25. For example, if the daily insurance rate is $20, a driver under 25 might pay $30 per day instead. Therefore, if you’re a young driver, be prepared for these higher costs and potential restrictions. Always check the rental company's age policies and fees before booking to avoid surprises.

4. Driving Record

Your driving record greatly affects car rental insurance costs. You'll likely pay less for insurance if you have a clean record with no accidents or traffic violations. For example, someone with a spotless driving history might pay $15 per day for insurance. On the other hand, if you have a history of accidents, speeding tickets, or other violations, you could face higher premiums or even be denied coverage.

Statistics show that drivers with a history of violations can pay 20% to 50% more for insurance. For instance, if your record includes multiple speeding tickets, you might be charged $30 per day instead of $15. Rental companies use your driving history to assess risk, so maintaining a clean record can save you money. Always check your driving record before renting a car to understand how it might impact your insurance costs.

5. Insurance Coverage

The insurance coverage you choose affects the total cost. Basic coverage usually includes liability insurance, which pays for damages to other vehicles and property. For example, if you only get liability insurance, you might pay around $10 per day.

However, adding options like collision damage waiver (CDW), personal accident insurance, and theft protection will increase your costs but offer more protection. With CDW, which covers damage to the rental car, you might pay an extra $15 per day. Personal accident insurance, covering medical expenses in case of an accident, could add another $5 per day. Theft protection, covering the rental car if it's stolen, might cost around $10 per day.

So, if you opt for full coverage, your total insurance cost could be around $40 per day compared to just $10 for basic liability. Deciding on the right level of coverage depends on your needs and how much peace of mind you want during your rental period.

6. Location

Renting a car in busy urban areas usually means higher premiums due to increased traffic and accident risks. For instance, renting in New York City might cost you $20 per day for insurance, whereas a rural area in upstate New York might only cost $10 per day. Additionally, renting a car in another country can add to your insurance expenses.

For example, renting in Europe might require extra coverage like international insurance, adding around $15 per day to your costs. Different countries may also have specific insurance requirements, increasing overall expenses. Always check the local regulations and insurance needs for the area you plan to rent. It helps you understand potential extra costs and ensures you're adequately covered.

7. Deductible Amount

The deductible is the out-of-pocket amount before your insurance starts covering costs. For example, if your deductible is $500 and you get into an accident causing $1,500 in damage, you pay the first $500, and insurance covers the remaining $1,000. Choosing a higher deductible, like $1,000, lowers your insurance premium, meaning you pay less monthly. However, you'll pay more if an accident happens.

On the other hand, a lower deductible, such as $250, increases your premium, making your monthly payment higher, but you'll pay less out-of-pocket if you make a claim. For instance, with a $250 deductible, in the same $1,500 accident, you'd only pay $250, and insurance would cover $1,250. Balancing your deductible with your premium can help you manage your insurance costs based on your financial situation and risk tolerance.

8. Credit Card Benefits

Many credit cards offer car rental insurance as a benefit. This can cover collision damage and theft protection, saving you money on extra insurance from the rental company. For example, if you rent a car that gets damaged, your credit card insurance might cover the repair costs, so you don't have to pay out of pocket.

However, it’s crucial to check the terms and conditions of your credit card to understand the coverage limits and any exclusions. Some cards only cover rentals for up to 30 days or exclude certain types of vehicles, like luxury cars. Knowing these details can help you avoid unexpected expenses and maximise your credit card benefits while renting a car.

9. Rental Company Policies

Every car rental company has its own policies and insurance options. It’s a good idea to compare different companies to find the best rates and coverage. For example, one company might include basic liability insurance in their rental price, while another might charge extra for the same coverage. At different rates, some companies offer additional insurance options, like collision damage waivers (CDW) or personal accident insurance.

By comparing these options, you can save big and get the protection you need. For instance, if Company A charges $10 per day for CDW, but Company B includes it in the base rate, you could save $70 on a week-long rental with Company B. Always check what’s included in the base rate and what costs extra to make an informed decision.

10. Extras and Add-ons

Extra services and add-ons, such as GPS, child seats, and extra drivers, can impact the total rental cost, including insurance. Each add-on has its own fee, which can add up quickly. For instance, renting a GPS might cost an additional $10 per day, while adding an extra driver could cost an additional $15 per day. These fees can also increase the insurance premium.

For example, if you add an extra driver to your rental, the insurance company might charge a higher premium to cover the additional risk. Therefore, it's essential to consider the cost of extras and their impact on insurance when budgeting for your rental. By understanding these fees upfront, you can avoid any surprises and choose the add-ons that are worth the extra cost for your trip.

Pro Tips to Reduce Car Rental Insurance Cost

  • Check if your personal auto insurance or credit card provides rental car coverage. You may already have adequate protection, which can help you avoid purchasing duplicate insurance from the rental company.
  • Assess your insurance needs and consider opting for only the essential coverage required by law, such as liability insurance. Skipping unnecessary add-ons like collision damage waivers (CDW) or personal accident insurance can lower overall insurance costs.
  • Shop around and compare insurance rates from different rental companies. Some may offer more competitive prices or include certain insurance types in their base rental rate, saving you money.
  • Look for discounts offered by rental companies or through membership programs. For example, AAA members or frequent flyers may be eligible for discounted rates or special insurance packages.
  • Airport rental rates tend to be higher due to additional fees and taxes. Consider renting from off-airport locations to find cheaper insurance rates potentially.
  • Opting for a higher deductible can lower your insurance premium. Just make sure you're comfortable with the out-of-pocket expense in case of an accident.
  • Watch for special promotions or seasonal offers that rental companies may run. You could snag discounted rates or additional insurance coverage at no extra cost.
  • Be selective with extras like GPS, child seats, or additional drivers, as each comes with its own fee. Avoid unnecessary add-ons to keep your insurance costs down.

With these pro tips, you can effectively reduce the cost of car rental insurance while ensuring adequate coverage for your trip.


Understanding the factors influencing car rental insurance can help you make informed decisions and save money.

If you have any questions about renting a car or related matters, please contact us at Finalrentals. We are here to make sure you have an easy time renting a car.