Homeowners are no strangers to insurance. We must carry homeowners insurance to cover the house, and many of us also carry private mortgage insurance for the first few years to cover the lender's risk. We also manage our medical and automobile insurance plans. So when the clerk behind the rental car counter asks if we want to buy coverage, it can sound like yet another inevitable protective expense.

But wait! You probably don't need it, because you already have it. Paying for something twice is a waste of money, yet it's surprising how many people do just that at the rental counter. Automobile renters will agree to pay $20 or more per day in case of damage when they already have such coverage via their credit card.

We will get into accident coverage soon, but first, our most important piece of advice about rental cars is this: Book early!

You've Already Booked the Rental Car, Right?

Anyone planning a vacation where a rental car plays a crucial role should book the car immediately, even before buying airline tickets. A lack of cars is causing some people to change their holiday destination this summer. Try to reserve a car before you buy nonrefundable airline tickets to that place.

Tips for booking rental cars in short supply.

  • Sign up for discounts, such as those at AAA and Costco.
  • Join the rental car company's free loyalty programs.
  • Book as far in advance as possible.
  • If bookings are next to impossible where you're going, look into renting a car from a local through Getaround or Turo.

Cars are in short supply in several popular vacation destinations, like Hawaii and Orlando, and not only because people have started traveling again. During the height of the pandemic, rental car companies sold off as much as 50% of their fleets, according to insiders quoted in a story on WTMJ Milwaukee.

The shortfall is hitting vacationers in Hawaii hardest of all. Many disused Hawaiian rental cars were shipped to the mainland last year to avoid storage fees and to replace rental revenue with sales. Replacing such cars is proving harder than anticipated across the country but especially for islands in the middle of the ocean.

Companies are scrambling to buy up used cars everywhere because the supply of new cars suffers from computer chip shortages. "They're buying them at auction because they can't get any new vehicles in order to supply the demand that they're seeing. That's something that we've never seen before," said Jonathan Weinberg, speaking to WTMJ. He's the founder of AutoSlash, a website that helps people compare and save on rental cars.

If you manage to reserve a car, brace yourself for astronomical rates. "Rental car pricing is running anywhere from double to triple what we normally see," said Weinberg. Besides Hawaii, other states hit hard by the inventory shortages are Alaska, Wyoming, and Montana.

People whose entire Hawaiian vacation hinges on a rental car are coughing up $800 a day. They're just so grateful to have wheels.

The number-one, most popular credit card in America comes with standard car rental insurance benefits.

Assuming you booked a car early and the keys are waiting for you at the counter when you arrive, you will be faced with the question of adding a loss/collision damage waiver ("LDW" and "CDW" are used interchangeably). This brings us to our second piece of advice: Don't pay for something you might already have.

"Don't sign any rental contract until you're sure that by doing so you're not accidentally accepting the rental company's coverage," wrote travel expert Rick Steves.

Look to See If Your Credit Card Already Provides Coverage

The credit card with which you book a rental car matters. The number-one, most popular credit card in America comes with standard car rental insurance benefits.

Visa credit cards come with auto rental collision damage waivers (CDWs). Visa is by far the largest credit card backer in America, with 336 million customers, according to the Nilson Report. Unlike its closest competitor, Mastercard (231 million), Visa provides standard rental car insurance benefits. No matter whether your card is branded Capital One, Bank of America, Chase, or another institution, so long as it's a Visa card you have the coverage.

What Visa Covers

If you carry a Visa card, chances are you have rental car coverage. Drill into your specific account benefits to be sure. Visa covers you for the following (source: Finder).

  • Rental car is damaged.
  • Rental car is stolen.
  • Rental company imposes loss-of-use charges or administrative fees.
  • You're charged a towing fee.

Coverage is valid for 15 consecutive days in your country and 31 consecutive days internationally. Trucks, some vans, exotic vehicles, and motorcycles are not covered.

Visa's coverage is secondary to your personal auto insurance, if you have it. This is an important distinction between Visa's coverage and that offered by Hertz, Avis, and other rental car companies. Some travelers are OK with buying daily coverage from the company because in the event of collision or theft, they can simply walk away. Their own auto insurance never comes into play.

“Remember to use [the] same card not only to reserve the car, but also to pay for it and any other related fees …. Switching cards can invalidate the coverage.”

   —Rick Steves

Because Visa's coverage is secondary, the card covers only what your personal auto insurance does not. Also, Visa reimburses you for any deductible.

If you have no personal auto insurance, then Visa's coverage is primary.

What American Express Covers

In contrast to Visa, the rental car coverage offered by American Express is primary in cases of damage or theft. You would bring your claim to American Express before involving your personal car insurance.

The Amex coverage is not free, but you buy it with a flat rate per rental period, usually from $19.95 to $24.95. It's cheaper in California ($15.95-$17.95) and Florida ($12.25-$15.25). This makes it much more affordable than the daily fees charged by rental car companies.

If you carry an American Express card, definitely consider enrolling in the coverage. You won't have to pay for it until you rent a car with your Amex. Then, every time you rent, the coverage will be charged automatically. Naturally you can unenroll anytime.

While Visa's coverage lasts 15 consecutive days, the AmEx coverage is good for 42 days (except in Washington, where it's good for 30). Also, American Express cardholders can scale up their coverage to include death and dismemberment and secondary medical expenses.

So the next time you book a rental car, save money by knowing what accident and loss coverage you already carry. Coverage by your credit card, even if there's a flat fee, is bound to be much cheaper than the coverage offered by the rental car company.