If you already own a car and have an adequate personal auto policy, you typically are covered by that policy while driving a rental car; therefore, you don't need the rental company's basic insurance.  However, we do recommend that you opt for the rental company policy's collision damage waiver, even though it may have a high deductible.

The collision damage waiver fills what may be a large gap between a renter's responsibility and what rental company policy will pay. This waiver will cover things such as diminution of value and loss of use.  Diminution refers to difference between the market value of the car when you rent it and the amount the car is bought for at a salvage auction.  Without the collision damage waiver, you are responsible for this difference. 

If you do not already have a personal auto policy, we recommend that you purchase the insurance offered on the auto rental contract.

Some credit cards provide automatic liability and physical damage insurance if you pay for the rental with that card. Your credit card terms and conditions, probably available on the credit card company's web site, will inform you about how much insurance is provided and under what terms.  In addition, some credit cards allow you to buy excess liability that applies when you rent a car.

Read the contract carefully.  If you buy the rental company's insurance, be sure not to violate its terms – don't allow another person to drive the car (unless you have paid the higher premium for that privilege), don't drive “under the influence,” don't drive recklessly, and don't drive on unpaved roads.  (That last one is a “gotcha.”)