What is secondary auto insurance coverage?

Secondary auto insurance is coverage offered by credit card companies for rental cars. If you have a personal liability coverage car insurance policy, this likely extends to your rental car, but this is probably not a sufficient level of coverage.

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UPDATED: Jun 16, 2022

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Written By: Laura BerryReviewed By: Joel OhmanUPDATED: Jun 16, 2022Fact Checked

Here's what you need to know...

  • Secondary auto insurance is rental car insurance offered by credit card companies to pay for certain damages in an accident while driving a rented vehicle
  • Secondary auto insurance isn’t liability insurance but rather backup insurance that only kicks in if other insurance runs out or won’t cover the accident
  • If you have full coverage personal auto insurance with a modest deductible and generous limits, then secondary insurance may be unnecessary

Secondary auto insurance is a specific type of rental car insurance. It’s often called backup insurance since it only kicks in after other insurance — like primary insurance or your personal auto policy — denies the claim or meets the coverage limit.

It can be tricky to understand primary and secondary insurance rules and how they work with your personal auto insurance. Here’s a breakdown of what secondary auto insurance coverage is, what it does and doesn’t cover, and whether you need it.

What is secondary auto insurance? 

Secondary auto insurance is a type of rental car insurance offered by credit card companies to pay for what other insurance won’t because they denied the claim or paid up to the policy’s coverage limits.

Secondary car insurance isn’t the same as primary auto insurance or your personal car insurance. However, all three insurance types could play a role if you get in an accident driving a rental, so it’s important to understand the distinctions between them and how they work.

Personal Car Insurance

If you drive regularly or own a car, you likely have your own personal car insurance policy. All states except New Hampshire have laws requiring motorists to have, at a minimum, auto liability insurance to pay the property and personal injury damages of other drivers and accident victims if you caused the accident. Auto liability does not cover your own damages.

For full coverage auto insurance, you can supplement your minimum liability policy with add-on policies, such as collision insurance, which covers your own property and injury in a collision. There’s also comprehensive insurance that pays for damages to your car for theft, vandalism, fire, hail, fallen trees, deer, and other damage not caused by a vehicle collision.

Typically, personal auto insurance extends liability coverage to rental cars, which means opting for insurance from the rental car agency or your credit card may duplicate the protection you already have. Check your personal policy coverage to understand how it works if you rent a car.

Rental Car Agency Insurance

If you’ve ever rented a car, you know that rental car agents try to sell their own insurance when you book or at the counter.

Rental companies offer liability policies to cover damages caused to others, collision/loss damage waivers to cover damage to the rental car, personal property insurance for personal effects, and accident insurance to cover injuries to you or your passenger.

As you can see, rental agency insurance probably duplicates coverage if you have personal auto insurance, so people frequently decline rental company insurance.

Suppose you don’t have a personal auto insurance policy or credit card that offers rental car insurance. In that case, you may have to take the rental car agency’s liability coverage since virtually all states require liability coverage to drive.

Credit Card Primary and Secondary Auto Insurance

Credit card companies have offered rental car insurance as a cardholder perk for years. Car insurance provided by your credit card doesn’t cost extra, but you must use their credit card to pay for the rental.

The two types of credit card rental car insurance are called primary and secondary, and it’s important to understand the difference between them.

Primary Auto Insurance

Primary auto insurance is coverage that pays first for an accident claim. If primary insurance doesn’t cover certain things — like deductibles — or damages exceed your policy limits, secondary insurance covers the rest.

Having primary car insurance through your credit card means if you get in an accident while driving a rental car, you don’t have to file a claim with your personal auto insurance. Consequently, you won’t have to pay your out-of-pocket deductible, and monthly rates won’t go up.

Secondary Auto Insurance

Secondary auto insurance — or “backup” coverage — pay amounts exceeding your personal auto or primary insurance from a credit card or car rental agency.

Since the coverage is secondary, you first have to go through the insurer with primary responsibility for the claim, which could be your personal auto insurance or primary auto insurance purchased at the time of the rental.

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What does secondary auto insurance cover?

Secondary auto insurance from your credit card only pays for certain things not covered by your personal auto insurance or other primary insurance.

You should always check the coverage terms and exclusions of any insurance policy, but here are some examples of what secondary auto insurance might cover:

  • Out-of-pocket deductible. Secondary auto insurance would cover out-of-pocket deductible costs on your personal auto policy.
  • Damages not covered by personal or primary insurance. If you only carry liability car insurance, secondary insurance covers rental car damage and personal injury expenses for the driver or passengers.
  • Claim denial. Secondary auto insurance could also kick in if other coverage gets denied for a policy lapse or filing after the claim period expired.
  • Amounts in excess of limits. If your personal or primary auto insurance limits are low, secondary car insurance will cover amounts that exceed other coverages.
  • Travel abroad. If you’re traveling outside of the U.S., secondary insurance acts as primary coverage because your personal car insurance likely won’t be accepted abroad.

It’s important to understand secondary auto insurance coverage before buying a policy.

What doesn’t secondary auto insurance cover?

The secondary auto insurance policy itself will specify what it doesn’t cover, but the most significant thing to understand is that secondary auto insurance isn’t liability insurance.

Many secondary auto insurance policies have payment limitations or only offer partial coverage. They also often exempt luxury cars and other high-risk vehicles from coverage, like trucks, trailers, and motorcycles.

Secondary insurance may pay the deductible on another policy, but it won’t pay the cost of premiums.

Should I get secondary auto insurance?

If you have full coverage — meaning liability, comprehensive, and collision coverage — with your personal auto policy, you probably don’t need secondary auto insurance, with three exceptions:

  • You have an extremely high deductible.
  • You recently filed multiple claims in a short period.
  • You don’t want to risk triggering a premium hike from another potential claim.

On the other hand, if you only have the minimum liability car insurance that doesn’t cover damage to the car you’re driving or your own injuries and property loss, then you might want to go with the secondary auto insurance, especially since you’re already using your credit card to pay for the rental.

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Bottom Line: Secondary Auto Insurance May Duplicate Coverage

By definition, secondary auto insurance should be secondary to other car insurance coverage. It doesn’t offer liability coverage, and the coverage it offers isn’t triggered unless your primary or personal car insurance determines it won’t pay the claim.

Since most of the protection secondary auto insurance offers is included in most collision and comprehensive policies, secondary auto insurance coverage is likely duplicative and unnecessary. In that case, secondary auto insurance only makes sense if you don’t have full coverage, have a high deductible, or have a history of claims.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

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