Protection When You Drive Abroad - some credit cards provide overseas car rental insurance

Kiplinger's Personal Finance Magazine, June, 1999 by Ed Henry

Does your credit card insure the rental car? Are you sure?

If you're planning to drive during a vacation outside the U.S. this summer, a couple of phone calls before you leave home could save you a heated discussion at the rental-car counter--and some cold hard cash. Your goal is to find out whether the credit card you use to pay for the rental provides insurance coverage to protect you if the car is damaged. Plastic protection could save you the $15 a day or so it costs to buy collision coverage--often called a collision damage waiver (CDW)--from the rental-car company. But there's no guarantee that your card will provide it.

Pick up your car at Charles de Gaulle airport outside of Paris, for example, and chances are good that coverage will be automatic when you charge the rental to a Visa card. Plop down the same card at a counter in Dublin, however, and you'll find yourself caught between the Blarney stone and a hard place. Earlier this year, Visa joined American Express in banning insurance for Irish rentals.

This is a real loss. Unlike in the States--where the credit card coverage usually pays only the deductible on your own auto-insurance policy, which then picks up the rest of the bill for damage to a rental car--when you're abroad it's unlikely that your policy will protect you at all. So you must either buy the rental company's coverage or go bare.

One solution is to use a different card. MasterCard still offers collision insurance on Irish rentals charged to its gold, platinum and world cards. Diners Club does too. The cards provide protection against theft or damage to the rental car (MasterCard caps its coverage at $50,000).

What if you're heading to Ireland and have only a Visa card? Ask the issuing bank if it offers a MasterCard with the same terms. If so, switching to a card that includes rental-car protection might save you a couple of hundred dollars or more on a two-week rental. Maria Mendler, a spokeswoman for Citibank, says the bank issues both cards and "all it takes is a call to customer service to make the switch." Plan ahead: It might take a couple of weeks to get your new card.

WHAT'S COVERED. Although Visa's Irish withdrawal adds a new wrinkle, insurance for rental cars is an issue rife with confusion. Before you venture anywhere abroad, take the time to call your card issuer to double-check its coverage policy. "I've had more than one customer a year who declined our coverage overseas because they thought their credit card covered them," says Gilbert Fletcher, vice-president of global sales at National Car Rental. "They have an accident, come back and because they didn't get the details, it becomes their responsibility to pay us."

In addition to Ireland, Visa and Amex don't cover rentals in Israel or Jamaica, but MasterCard and Diners Club do. In Australia, Italy and New Zealand you may be required to buy the rental company's insurance no matter what card you use.

In other parts of the world, as a rule, Diners, Visa and MasterCard's gold, platinum and world cards all provide CDW coverage. So do American Express's personal, gold and platinum cards. The American Express Optima, Delta SkyMiles, Hilton, Sheraton Starpoints and Golf cards offer similar protection--covering the cost of damage to the car.

When you call your card issuer, ask for a written explanation of the coverage, in case you run into a balky rental agent. It wouldn't hurt to call the company from which you plan to rent, too, to ask for its policy on requiring CDW. The better prepared you are at the rental counter, the less likely you are to stumble--or be led--into a costly mistake.

Whether you rely on your credit card or buy the rental company's CDW, you're getting protection against damage to the car you rent, not against liability for other damage you cause. The companies must carry liability insurance, and they bundle the cost into the rental rate.