When you rent a car, you absolutely need insurance...but that doesn't necessarily mean you should purchase it from the rental car agency. You most likely already have adequate coverage through your regular auto insurance policy or even through your credit card company.

Purchasing insurance from the rental car agency may significantly increase the overall cost of renting a vehicle, so do your homework before you walk up to counter. Start by visiting the rental agency's website, where you can usually preview the types of coverage you'll be offered and read up on the terms and conditions.

Various Options
One popular type of coverage generally offered is the Collision Damage Waiver (CDW), sometimes called a Loss Damage Waiver (LDW). If you purchase this waiver, you may not be held responsible if your rental car is stolen or damaged. But you may want to decline the CDW if you own a vehicle and have comprehensive or collision coverage, because the coverages and deductibles that apply to your own vehicle generally extend to your rental vehicle. If you have any questions, call your insurance company to learn what is (and is not) covered. Also, different rules apply for business and international travel.

Next, call your credit card company. Coverage varies, but many cards offer protection (the coverage will be secondary to any insurance coverage you have). To receive protection, you generally have to decline the CDW and charge the entire rental car transaction to the credit card supplying the coverage. Make sure you understand all conditions that apply.

Evaluate Your Own Risk Tolerance and Comfort Level
The bottom line is that if you don't have coverage through your auto insurance policy or your credit card, or you simply want the highest possible guaranteed protection, you'll likely need to purchase it from the rental car agency. But never wait until you're standing at the counter in front of the rental agent to decide, because if you do, it's easy to waste a lot of money buying insurance you don't really need.