How credit card car rental insurance works and 4 of the best cards that have it

When you're renting a car, you have the option to add extra coverage offered by the car rental agency. That, of course, comes at a fee added to your daily rate.

Before you purchase insurance at the counter, check if you're covered by either your personal auto insurance policy or your credit card. Most travel rewards cards come equipped with special car rental insurance which allows you to skip the rental company's insurance.

Ahead, CNBC Select explains how credit card car rental coverage works and lists some of the best cards that offer this perk with information on the car rental insurance coverage you get with each.

First and foremost, if you want to be covered by your credit card's car rental insurance, you must pay for the full rental cost (plus fees) with that card. Car rentals booked with points are generally included.

Typically, the cardholder also must be the primary renter, though other drivers are often covered if they are on the rental contract. Finally, your credit card's terms usually require that you decline the car rental agency's Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW).

Don't worry: Opting out of the car rental agency's insurance simply makes it possible to use the coverage provided by your credit card in the event of an accident. Just make sure that you know exactly what your card covers and whether it offers primary coverage and/or secondary coverage.

Note that not all types of cars are covered. Luxury cars and recreational vehicles, for instance, are often not included. There's also usually a limit on the number of days that you can take out coverage, often up to two weeks (14 days) or a month (31 days).

Most credit cards offer secondary coverage, which means the coverage kicks in after your personal car insurance policy. In the case of an accident, theft or damage, you'd first need to file a claim with your own car insurance company before submitting a claim through your credit card's insurance provider. If you don't have a personal auto insurance policy (i.e. if you don't own and/or drive your own car), secondary coverage may still kick in — just check your policy to make sure you're covered.

Primary coverage, on the other hand, is just like the name suggests. With credit cards that offer primary insurance coverage, you can submit an accident claim right away by calling the number on the back of your card, without first submitting it to a personal policy.

Liability coverage isn't included in most credit card and/or rental car CDWs, which only cover damage to and/or theft of the rental car (but not bodily damage or other personal property damage). If you're involved in an accident resulting in injury to another person, you probably won't be covered.

Full liability protection comes with the rental company's insurance. You typically have to add it on at the counter and/or at the time of reserving the car, unless you have extended rental car coverage through your personal auto insurance policy. Liability protection is likely more expensive for rental cars than for your own car; it runs about $8 to $25 per day. Some countries may actually require that you opt into liability coverage when renting a car.

Not all credit cards offer car rental coverage. For example, Discover doesn't provide car rental insurance. Citi also dropped this benefit on most of its cards. Some Capital One cards offer this perk as a benefit from the card network. American Express includes secondary car rental coverage on many of its cards with the option to buy a Premium Car Rental Protection policy that provides primary coverage. Most Chase cards come with this benefit as well.

CNBC Select reviewed our list of the best credit cards and chose the following options as the best for car rentals. Below, we include details about each card's rental car coverage.

• Best for car rentals: Chase Sapphire Reserve® and Chase Sapphire Preferred® Card
• Best for gas: PenFed Platinum Rewards Visa Signature® Card
• Best for dining and takeout: American Express® Gold Card
• Best for groceries: Blue Cash Preferred® Card from American Express

The Chase Sapphire Reserve® and its lower annual fee cousin, the Chase Sapphire Preferred® Card, are our top picks for the best cards for car rentals. Both cards provide primary car rental coverage for car rentals in most countries. These cards offer coverage for rentals of up to 31 consecutive days at a time. The Sapphire policy covers losses, including physical damage and/or theft of the rental vehicle, valid loss-of-use charges assessed by the rental company and reasonable and customary towing charges related to a covered loss.

View the Sapphire benefits guides for more in-depth info on rental car coverage:

• Sapphire Reserve guide
• Sapphire Preferred guide

The PenFed Platinum Rewards Visa Signature card comes with Visa Signature perks including a secondary auto collision damage waiver (CDW) that reimburses cardholders for the covered theft or damage as well as valid administrative and loss-of-use charges imposed by the auto rental company and reasonable towing charges that occur while you are responsible for the rental vehicle.

Coverage lasts up to 15 consecutive days within your country of residence or 31 consecutive days outside the U.S.

The Blue Cash Preferred® Card from American Express provides *auto collision damage waiver (CDW) covering theft and/or damage up to the cost of the vehicle for up to 30 consecutive days. Learn more about Amex's rental car insurance. Terms apply.

The American Express® Gold Card provides an *auto collision damage waiver (CDW) covering theft and/or damage up to the cost of the vehicle for up to 30 consecutive days. Learn more about Amex's rental car insurance. Terms apply.

• What's the difference between LDW and CDW?
• How do I know if my credit card has car rental insurance?
• How much is car rental insurance on a credit card?
• What happens if you don't have a credit card for a rental?

CDW covers damage to the rental vehicle in case of an accident. LDW offers the same protection, as well as coverage if the car is stolen. Since these terms are sometimes used interchangeably, pay attention to the fine print to know what kind of coverage you're getting.

You can check whether your card comes with car rental coverage by reading your card's benefits guide. You can also log in to your card account online and see if you can find the list of benefits. Finally, you can always call the number on the back of your card with any questions about the benefits available to you.

When car rental insurance is included as a benefit on your credit card, you don't need to pay to use it. However, if you want additional coverage, you might have to purchase it. For example, Premium Car Rental Protection from Amex costs $19.95 to $24.95 per rental period, depending on the coverage selection.

Most major car rental companies accept debit cards, even though you might face additional requirements, such as a refundable deposit or credit check. That said, to use your credit card's car rental insurance benefits, you must charge the full rental cost to it.

Car rental insurance can be a valuable credit card benefit that allows you to skip purchasing coverage at the rental counter. If you frequently rent a car, check if any of your credit cards offer coverage so that you know which one to use for booking. And if none do, it may be a good idea to look into cards that offer this perk to have peace of mind every time you're driving a rental.

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For rates and fees of the Blue Cash Preferred® Card from American Express, click here.

For rates and fees of the American Express® Gold Card, click here.

Eligibility and Benefit level varies by Card. Terms, Conditions and Limitations Apply. Please visit americanexpress.com/ benefitsguide for more details. Underwritten by AMEX Assurance Company. Car Rental Loss or Damage Coverage is offered through American Express Travel Related Services Company, Inc.