Costa Rica Rental Car Insurance: What’s the Real Deal?
The Costa Rica rental car insurance was the thing that stopped me from hiring a vehicle, till I decided to investigate what was the deal, why so many people actually complained, why was it so unfair, why most travelers thought this is the biggest scam in Costa Rica.
In a few words, car insurance in Costa Rica is partially mandatory (liability insurance, known as Responsabilidad Civil) and partially optional (CDW, SLI and No Excess/Full Insurance).
Simple, isn’t it? Not really, because a few rental companies don’t add liability insurance (mandatory) in the quote, so you think you have a great deal, but it’s not. But it gets worst because sometimes the optional part becomes mandatory. Of course, you will discover it only when you are picking up the car, which means you do not have any choice than accepting.
In this guide, I will tell you all you need to know about rental car insurance in Costa Rica and, more importantly, how to avoid what I believe is a scam.
Costa Rica Rental Car Insurance – Key points
Here below I have summarized the full set of car insurance in Costa Rica, either compulsory or optional. Click on the insurance type to read the full explanation, including scams (sorry car dealers but that’s what it is) that you may encounter and how to avoid them in a final section.
|Risks for Not Having It
|Responsabilidad Civil (Mandatory Liability Insurance – LI)
|Required by law. Covers damages to third parties or their property if you cause an accident. Doesn’t cover the rental vehicle. Some rental agencies do not include it in the rental quote, which is, in my opinion, a scam because you will have to pay it at the car collection when you don’t have options and they can ask you more than the market average.
|It’s mandatory. You cannot drive without it.
|Collision Damage Waiver (CDW)
|Optional coverage to protect you from financial loss if the rental car is stolen. Some limitations may apply. Technically it’s not mandatory, however, most rental agencies require it.
|Financial responsibility for damages to the rental vehicle
|Optional coverage increases the amount of liability coverage beyond what’s required by law.
|Financial responsibility for a stolen rental vehicle
|Supplemental Liability Protection (SLP) or SLI
|Optional coverage that increases the amount of liability coverage to the vehicle, and third-party damages, and it often includes extras like roadside assistance.
|Higher financial responsibility if you cause an accident
|Full Insurance (No Excess)
|It typically covers not only third-party damages and personal injuries but also any damage to or theft of the rental vehicle itself. In many cases, it also includes additional services such as roadside assistance (no out-of-pocket expense for the insured).
|Financial responsibility for all types of potential losses
|Personal Accident Insurance (PAI)
|Optional coverage that provides medical benefits for the driver and passengers in the event of an accident. This is typically already included in Travel Insurance, assuming you have one
|Financial responsibility for medical costs in case of an accident
|Risks of Not Having It
|Coverage provided by some credit card companies. Can vary widely, so check with your credit card company for specifics.
|Depending on coverage, could be responsible for various financial losses
It comes without saying that, doesn’t matter the level of insurance, you should always take multiple photos and even a video of the car when you collect it. Remember to take pictures also of the interior of the car, often not covered by any insurance. For instance, they could possibly charge you for white stains on the seats.
How old you have to be to rent a car in Costa Rica is a question that not only may prevent you from hiring a vehicle but also may influence the total cost of insurance.
Mandatory Liability Insurance
In the realm of Costa Rican car rentals, Liability Insurance is a requisite. As its name suggests, this insurance safeguards against liability costs arising from damages inflicted on third parties or their property.
Ensuring you have this insurance means that you’re legally cleared to venture onto Costa Rica’s roads. It’s worth noting that this insurance, while mandatory, has its limitations. It typically includes medical expenses, property damage, and legal costs for third parties in an accident where the renter is deemed at fault.
However, there is often a deductible tied to the policy, which indicates the renter’s financial responsibility before the coverage kicks in.
One glaring limitation is the cover amount itself, often capped at a specific limit. Any costs exceeding this limit will have to be borne out-of-pocket by the renter.
In a few words make sure to understand two important values:
- the deductible: this tells you how much you have to pay in case of an accident before the insurance kicks in
- the cover limit: this tells you what is the maximum amount that the insurance is going to pay
Usually, the deductible is the issue, the value that you want to be as low as possible. If it is, for instance, at $1,000, you will be out of pocket for most of the minor damages (typically charged between $500 and $1,000)
And now let’s get down to two deceptive practices. I have included these practices in my list of rental car scams in Costa Rica because I believe these costs should be clearly shown on the quotes.
One common pitfall is rental companies excluding the cost of Liability Insurance from their quoted prices. In this way, their quote seems like a great deal but it’s not because it excludes the most important must-have insurance.
I usually rent my cars with DiscoverCars where there are no small letters. The Rental Conditions have a Protection section with all included insurances, plus you can also verify all is included in the price and what is optional.
You may find yourself blindsided at the counter when you’re handed a bill far exceeding the quote you initially received. This ‘bait and switch’ can add a significant amount to your budget.
The average cost of Liability Insurance is not fixed. It depends on many variables (car type, renter age, etc). Nevertheless, an average estimation ranges around $10-$20 per day. When paid at the rental counter, the price is often inflated as rental companies try to pad their profits (and you have no options).
Another possible misunderstanding created by the rental companies is about the terminology used. They may not talk about Liability Insurance, but they talk about Third-Party Liability (TPL), usually included, and Public Liability Insurance (PLI), not included but mandatory.
Let me tell you first the differences between the three.
- Liability Insurance: In the context of car rentals in Costa Rica, Liability Insurance often refers to the coverage for any damage or injury caused to other vehicles, property, or individuals. This is of course when in an accident the driver of the rental car is at fault.
- Third-Party Liability (TPL): This is essentially the same as Liability Insurance, covering damages to third-party individuals or properties in an accident where the rental car driver is at fault. The term “third-party” is for any individual or entity that is not in the contract. This is anyone other than the insurance company and the policyholder.
- Public Liability Insurance (PLI): This term isn’t as commonly used in Costa Rica’s car rental industry, but if it were, it would usually refer to a type of coverage that a business (like a car rental agency) would carry to protect against liabilities to the general public connected to their business operations.
Rentals may include Third-Party Liability (TPL) but exclude Public Liability Insurance (PLI) which, again, you will have to pay at the rental desk. This can be around $5-$10/day
I will talk more about scams when you rent a car in Costa Rica, however, I like to mention here another unexpected cost I had on my last trip, the LPF (License Plate Fee). Mandatory once again, this refers to a levy on every vehicle (collected by the local tax office, the Ministerio de Hacienda, through the rental companies)
This is usually charged as a daily fee (around $2) or as a percentage (6% was in my case)
The thing is that once you are at any rental company they try to sell as many insurances and policies as possible. It was already late in the day and I honestly did not read the basic inclusions of my No Excess insurance. My fault.
This section covers all the optional insurances, however, be aware that, for example, the CDW is often considered mandatory by most rentals nowadays. You may have it already on your credit card though. I will talk more about it later.
Supplemental Liability Insurance (SLI)
Supplemental Liability Insurance (SLI) increases the maximum coverage for damages caused to third parties in an accident. In Costa Rica, the basic mandatory liability insurance often has a coverage limit. While it satisfies the legal minimum, the cap may not be sufficient in case of a serious accident.
This is where SLI steps in. It provides an additional layer of liability protection, significantly increasing the upper limit of coverage. It can cover third-party property damages, injuries, or death.
Having SLI means if you’re involved in a significant accident causing extensive damage or serious injury to third parties, you’re less likely to be personally liable for costs that exceed the basic coverage.
However, keep in mind that SLI does not cover damages to the rental vehicle itself – that falls under the Collision Damage Waiver (CDW) or other types of coverage.
SLI can be charged on a daily basis or as a percentage, typically around 20%. Should you take it? This is your personal decision, take your time to think about it and avoid being pressured at the counter.
Collision Damage Waiver (CDW)
Collision Damage Waiver (CDW) is an optional coverage that protects you from paying any repair costs if the rental car is damaged. This coverage is also referred to as Loss Damage Waiver (LDW) in Costa Rica. It is not a form of insurance in the traditional sense, but rather a promise from the rental company to waive the costs of damage.
In the event of an accident, CDW covers the expense of repairing the rental car or its current market value if it’s deemed a total loss. However, CDW often has a deductible amount, which is the initial cost that you will need to pay out-of-pocket before the waiver takes effect. This deductible can vary widely depending on the rental company. It can be as high as $3000.
It’s essential to understand that CDW only covers damage resulting from an accident. Usually doesn’t cover windows, mirrors, wheels, towing, lost keys, lockout fees, or admin charges.
If you decide to rent a 4×4 in Costa Rica, be aware that your credit card CDW may exclude off-road vehicles although the rental agency CDW includes it.
In Costa Rica, while CDW isn’t mandatory, it’s strongly recommended considering the country’s rugged terrain and the potential for damage to the rental car.
It is a sort of a must-have, especially, if you are driving in Costa Rica for the first time.
Full Insurance (No Excess)
Full Insurance (No Excess), or Extended Protection, is a comprehensive coverage option often offered by car rental companies in Costa Rica. It eliminates the deductibles that are associated with Third-Party Liability and Collision Damage Waiver/Loss Damage Waiver. This means that in the event of damage or an accident, you would not go out of pocket.
This coverage goes beyond basic insurance and covers a broader range of scenarios. For example, it often includes coverage for tire and windshield damage, undercarriage damage, theft, and even vandalism – situations not typically covered under basic insurance options.
This kind of coverage provides peace of mind and can prevent unforeseen out-of-pocket expenses during your trip. It’s honestly a lifesaver, especially on the tough roads of Costa Rica.
The biggest problem is that the rental companies charge an arm and a leg for it, sometimes even up to $50/day.
I usually rent my car with DiscoverCars (a rental aggregator) which provides some amazing value deals. But besides that, they offer full insurance (no excess) at just $7-8/day, which is a real bargain.
There is a difference though. If you take the rental agency’s full insurance, in case of damages, they will look after everything and no payment from you. With DiscoverCars‘s full insurance you go out of pocket and pay the rental company for any damage, however, keep the bills because DiscoverCars will refund everything.
And let me say that I damaged the cars on two occasions (a $4K damage in one case) and they paid back everything (the process may have been slower than I wanted but it did happen, which was absolutely great for such a small daily cost).
Personal Accident Insurance (PAI)
Personal Accident Insurance (PAI) is a coverage option often available when renting a car in Costa Rica. PAI primarily provides medical benefits for the driver and passengers in the event of an accident.
This can be particularly useful in a foreign country where your domestic health insurance may not offer coverage. It can help offset hospital bills, ambulance fees, and other associated medical costs that could arise from an accident.
It must be said that the medical coverage may be already included in your travel insurance policy and/or your health insurance coverage. Often, these policies may already offer some form of coverage for medical expenses abroad. If this is the case, PAI could be an unnecessary duplication of coverage.
Credit Card Insurance
Credit card insurance can be a valuable perk when renting a car in Costa Rica. Many card companies offer Collision Damage Waiver (CDW) coverage as a benefit, which could allow you to decline the same coverage offered by the rental company.
This can be a significant cost-saving opportunity (around $15-$20/day). The credit card’s CDW usually covers damage or theft of the rented vehicle, and it becomes effective after any other applicable insurance.
Credit cards including CDW are very common in the USA, but not as common, for example, in Europe and Australia.
Check however the small letters. Credit card insurance usually applies as secondary coverage, meaning it covers only what your primary insurance doesn’t. It also typically doesn’t cover liability claims, damage to other vehicles, or injuries. Another crucial aspect to consider is the limit of coverage, which may not cover a 4×4, high-end, or luxury vehicle.
Remember, to activate the insurance, you need to use the card to pay for the rental and decline the rental company’s collision coverage (otherwise it would invalidate the credit card insurance). Additionally, each card issuer has different rules, so it’s necessary to read your card’s benefits guide or contact customer service for clarification.
Be aware that most car rental companies in Costa Rica may not readily accept credit card insurance as sufficient coverage. In these cases, you might be asked to provide documentation from your credit card company that explicitly states coverage in Costa Rica, with your name on it.
It’s always best to contact your card issuer to get a letter confirming your coverage. Additionally, some rental companies might still require a deposit if you’re using your credit card’s insurance, which could be a significant amount blocked on your card for the duration of the rental.
Lastly, credit cards don’t usually include full insurance (no excess), however, you can add it to cover the deductible.
Insurance Fraud Scams and how to avoid them
Navigating rental car insurance in Costa Rica can be challenging, particularly with the prevalence of certain dubious practices that can potentially inflate the cost of your rental.
Undisclosed mandatory insurance
As already mentioned, one common scam involves undisclosed mandatory insurance. In this scenario, the rental car company offers a low initial quote that doesn’t include mandatory liability insurance.
Upon arrival, you’re informed that you must purchase this additional insurance, significantly increasing the total rental cost. To avoid this, confirm the total price, including all mandatory insurances, before booking.
Inflated insurance cost
Another typical scam is the inflated insurance cost. Some companies may overcharge for additional insurances, such as CDW, SLI, or PAI, under the premise that these coverages are essential.
Always remember that, beyond the legally required PLI, additional insurances are optional. In saying that, most rental companies add in the quote small letters that CDW is mandatory too when you rent with them.
Moreover, you may encounter high-pressure sales tactics to purchase unnecessary insurance (like in my case with the ERA, Emergency Roadside Assistance). Some agents might insinuate or assert that your credit card insurance is not valid in Costa Rica, which is not necessarily true.
Prior to your trip, reach out to your credit card company to clarify the specifics of your coverage and, very importantly, get a confirmation letter to present to the rental company.
How to try to avoid these scams
This is what I usually do which is not bulletproof but at least it has avoided some major pitfalls.
I usually rent my cars with DiscoverCars because it’s clear what is and what is not included in the quote. Now there is a trick here, which is common to all rentals, you need to set your Driver’s country of residence.
By default, the system takes the one where you are doing the booking. It took, for example, the USA when I was doing the booking from Miami and I changed to Australia, where I am a resident.
This makes a huge difference in the legislation. Following the consumer regulations in Australia (or even in the UK), you get presented only quotes including Liability Insurance (or TPL) and CDW/LDW, which is great because if you select also the DiscoverCars Full Insurance, you can totally relax on the coverage side.
However, this is not the same with US residents, where quotes can be done even omitting the mandatory Liability Insurance (not to talk about the CDW/LDW). Prices are extremely lower, of course, but then you need to buy them inflated at the counter.
Scroll down to the cars that include the Liability Insurance and also the CDW/LDW (in case not covered by your credit card). Add the Full Insurance (if you prefer peace of mind) and you are set to go.
Here below I have taken a screenshot of cars available in the same search period, however, with different residences. You can notice the huge difference in rental costs but also the fact that no insurance is included in the cheap price. Do not fall into this scam. Scroll down and be sure to select the car with the appropriate insurance.
In conclusion, understanding Costa Rica’s rental car insurance landscape is crucial to a stress-free journey.
Be aware of the mandatory Public Liability Insurance, along with optional additions like CDW, SLI, PAI, and Full Insurance. Also, be aware that CDW is nowadays considered mandatory by most rentals, so plan to have it ahead of time to save money and time.
Credit card insurance can offer an affordable alternative, but it should be verified beforehand. Ask the Credit Card company to provide documentation on the actual CDW coverage with your name on it. Make sure it works in Costa Rica and that covers 4×4 if you rent one.
Lastly, make sure the Airport Surcharge is included.
In true honesty, rental companies have always a new fee and you should account for that, but once you cover all of the above, you have at least protected yourself from the biggest fees and you may expect $2-5/day more for some Mystery fees.