Make sure you have right insurance for car rentals © Digital Vision/Getty Images

The Basics

Is that rental car really insured?

The last thing you want on vacation is a costly surprise. Here are 3 ways to ensure you've got coverage.

By Jennifer Openshaw, MarketWatch

If you're driving a rental car on vacation, watch out: You might not have the insurance coverage you think you do.

While most states require drivers to carry minimum coverage on their own cars, no such requirement exists for rental vehicles. Rental agencies typically offer optional coverage for an additional fee, but your existing auto policy often extends coverage to include rentals.

Such was my assumption when, on a recent family vacation to Spain, we declined the optional insurance.

But driving on the unfamiliar, twisting and narrow streets of Europe is a very different challenge, carrying a higher level of risk than a leisurely jaunt to the Hamptons.

On the first full day of our trip, my meticulous husband dented the side of the new Renault while trying to maneuver out of a ridiculously tight parking-garage space. I said, "Well, thank goodness we've got insurance."

But something told me to double-check. So I called our car insurance company, and, sure enough, our existing policy covered domestic travel (including Mexico and Canada), but not international.

As I hung on the phone considering my options, the insurance representative noticed we also had a MasterCard with them. After some quick research, he found to our immense relief that our credit card indeed would cover damage to the rental car, though not any injuries or damage to other property.

Armed with that backstop, 10 days later we turned in the Renault and braced ourselves for an interminable wait and the inevitable repair-estimate sticker shock.

To our amazement, after a few moments the agency clerk handed us the bill; it included a "damage to exterior" charge of $153.35. Excuse me? We were expecting 10 times that!

As we headed to catch our flight, counting our lucky stars (and wondering if we had gotten away with something), the realization came to us. The rental company no doubt had in place a practice that, for minimal damage, assessed a surcharge big enough to cover their highly efficient repair costs but small enough so the renter wouldn't challenge the bill.

Plus, imagine the cost and time involved in dealing with insurance companies. The benefit of a speedy resolution to our dings and dents was now obvious.

Continued: 3 tips

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