Car rental deductible

Go with the full coverage. Even if you don't get a scratch or dent or a flat, they may put a hold on your credit card.

Absolutely take the full coverage so you can walk away from any real or perceived issues. It is worth it for the peace of mind.

If you rent through www.autoeurope.com, a consolidator, their zero deductible contracts with Europcar or Hertz are only about $4 a day extra compared to the ones with the deductible of 1,000€.

Here is the usual deal (I am sure an exception or 2 exists)

Being on the hook for 1000 euro is actually not that much, considering the car you get might be worth 20,000 euro.

If you do have a credit card that covers you in Italy (don't assume, check) you can go with that ; just understand how it works you need to check the car for damage in, damage out ; if anything should happen expect they will charge your card immediately for the damage up to the deductible ; in this case 1000 euro
You then would need to collect all of the needed paperwork and go back and forth with your credit card to get yourself reimbursed, often months later.
The rental car company will not be very easy to get information from once you are back in the US and US HQ of same company will not care. The credit company will not do anything on your behalf without you doing the legwork and submitting the forms.

A definite pain the rear but something you can do ; and that is only if damage does happen.
That is why the car company is saying they don't accept that ; they mean they will charge your credit card for the damage and you need to have available hold money on the card's credit line for the duration of the rental for that 1000 euro.
At the counter you can definitely insist on no extra coverages and hand them a credit card. They frankly don't care or even know if your card includes coverage in Italy as long as your card has the balance available to pay for damages.

If that sounds like too much hassle for you, then buy the rentals 0 deductible then you need not care about anything, you are covered ; within reason of course.

My answer: I do have cards that cover me and have done both (sometimes taking the chance and other times paying extra for the 0 deductible). For me it all depends on how much the 0 deductible costs, sometimes how much the trip is costing overall comes into play as does my perceived likelihood of getting a scratch or two along the trip.

Purchase the zero deductible for the peace of mind. We travel in Italy every year with a car and we purchase this coverage and will continue to do so.

Buon viaggio,

There are some potential pitfalls. Be aware that...

1. For SOME (not all) insurance provided by credit cards, you must "decline all coverage" offered at the rental counter, or else the credit card's insurance is not valid.

2. All car rentals in Italy are required by law to include SOME insurance (although probably Not The Insurance You Want). So it is technically impossible to "decline all coverage" at the counter. This is an apparent 'catch 22' but there may be a way that works, depending on the credit card.

3. SOME (not all) insurance provided by credit card is valid in Italy - but insurance from many cards is not. You need to check carefully with the credit card company (actually the 3rd party insurance company they contract with) for the details about your card. Get it in writing. It's imperative that you read their policy and understand it.

4. Always, always inspect the vehicle very closely and take photos/videos of the car to document it's condition when you pick it up; do the same when you return it. Keep those records for a full year after you get back, just in case you get a surprise fee for vehicle damage months after your trip is just a memory.

Do your homework now. Do not wait until you arrive at the rental counter, jet-lagged, tired, language-challenged and feeling pressure from those in line behind you to just sign the damn papers and move on. Make sure you know what to expect and what you will do.

Get the extended coverage.

Get the $0 deductible for a stress-free rental. As Roberto said above, go through AutoEurope for very affordable insurance - Hertz and Europcar usually offer it and the upcharge from a high deductible is minimal.