If you need to rent a car while visit Costa Rica get ready for some bewildering insurance requirements.   You see, Costa Rican car rental companies offer super low rental prices for their cars……but they make their money on highly inflated insurance plans that, they insist, are required.   In fact, most of the insurance is not required at all.     Insurance and Damage Waivers are a major source of income for the rental agencies because they are basically pure profit. The Rental Car Association of Costa Rica states that much of the pressure to purchase comes because the sales people are paid a commission on these products.

One”required” insurance is the liability insurance from Costa Rica’s INS insurance monopoly that car rental companies are obligated to purchase.   Renters do not purchase this required insurance, only the car rental companies.  The rental company only pays about $2 per day to the INS for the government mandated SLI but then charges between $10 and $15 a day.  This liability insurance is referred to by rental companies as “Mandatory” SLI, TPL, SLC or API.   Basically, it is coverage that covers the costs incurred by other drivers (or people) affected by your driving. We strongly recommend that you buy liability insurance through third-party insurance carriers online OR when you rent the car.  We used Kemwel Car Rentals, an international third-party aggregator, who arranged a car rental with Thrifty.   We got a very good price and Kemwel offered a package that included liability insurance at a modest price.

All other insurance is optional and can largely be covered by the CDW (Collision Damage Waiver) that comes with your credit card.  If you use a credit card to purchase Costa Rican insurance, the odds are that the auto insurance benefit provided by the card will cover the CDW.  However, in order to avoid buying CDW from the car rental company, you must have a proof of coverage letter.  You can often get this document online or via a phone call to your card issuer’s customer service line.   They’ll email you something that looks like this:

The car rental companies will pressure you to buy CDW, in part, because it is even more profitable than liability insurance.   They’ll charge between $20-40 per day for this waiver.  (essentially, it means that the renter is waiving its rights to collect damages to the car in case of an accident).  Most of the time no damage occurs and in the rare cases that it does it’s nearly always covered by the two grand deductible that the renter still has to pay out of pocket even if they opted for CDW coverage.    So it really pays to bring along a proof of coverage letter, thus eliminating the need to purchase this  overpriced-but–relatively-useless CDW coverage. The rental salespeople will push hard, warning of all of the paperwork and out of pocket costs that you’d incur if you use the credit card company’s CDW coverage rather than buying theirs.   They’ll also tell you that should a claim become necessary, your credit card (if applicable) is liable for 100% of damages to and/or theft of the vehicle and that you’ll have to submit and follow through on the claim. So expect to pay upfront for any and all expenses and then the card issuer will reimburse you.

When you rent a car, you will also be required to place a deposit. Generally, this runs from $700 to $1,500 and depends on the type of car you rent. The rental company puts a hold for this amount on your credit card and releases it when you return the car in good, working condition. The deposit is not released immediately, however, but rather requires around 3-4 weeks to be placed back onto your credit card. If an accident does occur, your deposit will be held while your case goes to court.  Once a judge has decided the final verdict, your deposit will either be refunded or go towards paying for the car’s damage.

Our final tip:  make sure you bring your smartphone along on your trip because you’ll need it for directions.  Google Maps works excellently in Costa Rica and aided by this app, you’ll be able to find almost any destination in Costa Rica.   There’s no need to rent a GPS device from the car rental agency (at a cost of $10 per day, usually).