SHOULD YOU BYE OLD CAR?

To avoid a costly mistake, use this step-by-step guide.

Step 1.

Determine whether your own policy will cover your rental car.Most companies will extend the coverage on your personal auto policy to a rental car. The important fact is whether you have purchased Comprehensive and Collision coverage on your own car. That's the coverage that pays for damages like scratches, dents and thefts, among other things. If you have this coverage on your own policy, it will generally transfer to a rental. Call your company to check—but before you do, keep reading.

Step 2.

Find out if your credit card company will cover damage to the car.Many credit cards will pay for damage to a rental car when you pay with that card, but the coverage will be secondary to your own policy if you have one. Your card may also pay for towing—but will never pay for damage or injury that you cause to another car or driver. That's covered by liability or personal injury protection—which is why having your own policy is so important.

Step 3.

Are you traveling for business or pleasure?Many employers have corporate coverage for employees who rent cars, so don't buy the extra coverage unless you've checked with your boss or the fleet department first. When you travel for pleasure, your rental car is considered a temporary substitute for the car you've left at home—and that's why your policy may provide coverage.

Step 4.

Be cautious if you're leaving the state—or the country.In the United States, insurance laws are different in every state. Policies in some states like Massachusetts may only cover travel within the state. But, in most states, you're covered as long as you drive in the US. However, many policies may limit coverage if you travel to Canada and very few will cover travel to Mexico. And if you're traveling abroad, most travel guides recommend buying the coverage with the rental car, because it's too complicated to deal with insurance in another country.

Step 5.

Don't let a stranger drive your rental car.Or your best friend, boyfriend or teenage daughter. Rental car companies are picky about who drives their car and any coverage you have on your own policy (or the rental car policy) may not cover another driver—unless they are listed on the rental contract.

This is intended only as a guideline. Ask your company about the coverage available on your own policy.