Some credit cards can replace car-rental insurance

You could save up to $28 a day by skipping car-rental insurance. But getting replacement coverage from a credit card depends on two key questions. 

Even if you own a car, there are times you need to rent one – whether it’s a business trip or that vacation to Puerto Rico. Whatever the reason, there are certain decisions you need to make – one of the key ones is whether to accept car rental insurance.

Costing up to $28 a day, the car-rental company’s option isn’t cheap. The advantage is that it typically provides primary coverage for loss damage waivers (LDW) and collision damage waivers (CDW). Essentially, that lets you off the hook if the rental car is vandalized or stolen, or if you crash it. And because it’s primary coverage, you don’t have to go through your personal auto insurance, which could jack up your premiums.

Is there cheaper insurance? Credit card companies offer some alternatives. Whether it’s the best option for you depends on two questions: 1) Do you already have auto insurance? 2) Does the credit card offer primary or secondary insurance coverage?

Most credit cards offer only secondary coverage. That covers the gaps that primary insurance doesn’t offer, such as a deductible and any excess of liabilities above the limit of primary coverage. So if you have a fender-bender and don’t pony up for the rental car company’s insurance, you still have to go through your insurance company.

But if you don’t own a car – and thus, don’t carry car insurance – secondary insurance through a credit card becomes a great deal. You get the coverage you need because, through standard terms of a credit card, secondary insurance becomes primary for the uninsured. And you don’t have to pay a deductible.

If you do carry auto insurance, then it gets trickier. To replace the coverage you'd get from the car-rental company's insurance, you need a credit card that offers primary insurance. Only some cards offer this perk.

Take MasterCard. Only a few of its World cards, with hefty annual fees, offer primary coverage. Even some World cards, like CitiBusiness AAdvantage World MasterCard, with an annual fee of $95, offer only secondary coverage. So check with your bank before you use a MasterCard to pay for a rental car.

Ditto for Discover, where only one of its offerings – the Discover Escape Card, with an annual fee of $60 – comes with primary coverage.

By contrast, some no-fee Visa cards come with primary coverage, including the AT&T Universal Business Rewards Visa and Delta Community CU Visa card.

Only Diners Club offers primary coverage on all its cards, including the Diners Club Commercial Card and Diners Club Professional Charge Card.

American Express has an intriguing alternative: temporary primary car rental insurance. For a onetime $24.99 fee, you can get its Premium Car Rental Protection, which pays for 42 days of coverage and up to $100,000 in liabilities.

Before you rent your next car, do your research. Find out whether your card offers the right kind of insurance for you, so you can save some money on the front end, while being fully covered, if you have to submit a claim.

– Michael Germanovsky is a credit card expert and the editor-in-chief of Credit-Land.com, a credit-card comparison website.