Do You Need A Collision Damage Waiver?

When you rent a car, you will be asked if you want to buy optional coverage called a collision damage waiver (CDW). This insurance covers damage to the rental car. It can be a pricey proposition, but it may be worth buying, depending on your own car insurance and credit card coverage.

When Should You Buy a Collision Damage Waiver?

A CDW covers rental car repair bills if there’s an accident or the car is stolen. It’s a good option if you don’t have:

• Your own car insurance
• A credit card with rental car coverage that you use to pay for the rental
• A third-party rental car insurance policy

A CDW may also be worth considering if you:

• Simply want to be sure you’re not responsible for any extra charges due to vehicle damage.
• Don’t want the hassle of identifying coverage gaps in your auto insurance and credit card coverage.
• Have car insurance but don’t want to risk your insurance rates rising if there is an accident with the rental car.
• Don’t want to pay for any damage out of pocket and then have to wait to be reimbursed by a credit card company or car insurance company.

If you turn down a CDW, the rental car company can charge you for more than car repairs. They also usually charge for:

• Loss of use. This is the rental money lost while the car is being fixed.
• Towing. If you can’t drive the car after the accident, you can be charged for towing.
• Diminished value. This is the decrease in the car’s value even after repairs are made.
• Administrative fees. Extra costs associated with the claims process.

While your own insurance or a credit card’s coverage may pay for some of these costs, the expenses can vary by company. And in some cases, you have to rely on cooperation from the rental car company.

How Does a CDW Work and How Much Does it Cost?

Rental companies typically offer a CDW when you make an online reservation for a rental car and again when you pick up the vehicle. When you purchase a CDW, the rental car company gives up the right to charge you for damages to the rental car. But there are usually a few exceptions—for instance, for tire and side mirror damage, or for “gross negligence,” meaning you were speeding, racing or driving while intoxicated. The names used for CDWs vary. So study the details carefully before signing.

The cost of a CDW is generally about $30 per day. That means it can hike your rental cost by around $200 a week. Rental car companies can make a profit from selling CDWs, so it’s common for staff to be aggressive when pitching them to customers.

Weighing Options to a Collision Damage Waiver

You have options other than buying a CDW from a rental car company. Here are possible alternatives to buying CDW coverage.

Credit card

Many credit cards provide insurance for rental cars as a benefit, as long as you use the card to pay for the rental. While you won’t pay extra for the benefit, it’s important to know the limitations that might come with your card’s rental car coverage. Here are some key considerations:

• Some credit cards only offer coverage in the United States. You’ll need a card that covers international locations if you are renting a car overseas.
• Most credit cards have secondary insurance for rental cars. This means the credit card company only pays for the amount not covered by your auto insurance policy.
• Credit card rental collision coverage may not pay for the diminished value of the damaged rental.
• Compensation for loss of use revenue is usually contingent on the rental company providing fleet log documentation, and it’s possible that your rental company won’t respond in a timely manner.
• You may have to pay the rental company up-front for the damage, and then file for reimbursement from your credit card company.
• The rental company’s administrative fees may not be covered by the credit card.

Auto insurance

If you have car insurance for your own vehicle, it usually extends to rentals and property damage you cause, and covers liability up to your policy limits:

• Liability car insurance pays for damage you cause to another vehicle or other people’s property if you’re at fault for an accident.
• Your collision coverage can extend to rental car damage.
• Your comprehensive insurance can extend to rental cars that are stolen or damaged by fire, flood, vandalism or other problems.

Consider, however, that if you use your own insurance coverage:

• Your rates may go up if you file an insurance claim.
• You will have to pay a deductible if you file a comprehensive or collision coverage claim. An insurance deductible is the amount deducted from an insurance claims check.
• It will likely not pay for diminished value.
• It will likely pay for the rental company’s loss of use.
• It may not pay for towing.
• It will likely not pay for administrative fees.

Standalone rental car insurance

Another way to get coverage is to buy a standalone rental car insurance policy. Coverage varies and there are often exclusions, so you want to make sure you read the fine print and understand what’s covered and what’s excluded.

Here’s what to know about getting a separate rental car insurance policy:

• Decline insurance coverage from the rental car company if you have a separate rental car insurance policy.
• Coverage from a standalone rental car insurance policy could include roadside assistance, cracked windshields, lost keys, flat tires and towing.
• A stand-alone rental car company may not cover all vehicles, such as luxury cars, trucks and campers.
• A policy may provide collision coverage to the rental vehicle, but it might not cover bodily injuries. Check with your own car insurance company to see if it offers that coverage.
• Standalone rental car insurance policies have coverage limits, so a policy may not cover all of the damages if you’re in an expensive accident.
• A separate rental car insurance policy may not cover you outside of the U.S. and Canada.
• Consider adding rental truck insurance when moving.

Travel insurance with rental car coverage

You may be able to buy rental car damage coverage from a travel insurance company when you insure your trip. If you choose this option, you may not need the CDW offered by the rental car company.

Certain rental vehicles are typically excluded from coverage such as motorcycles, vans and campers.

Buying rental car coverage from a travel insurance company may come with some handy extra perks as well. For example, OneTrip Rental Car Protector Plan from Allianz Global Assistance includes:

• A collision damage waiver for up to $50,000 in damage
• Coverage for trip interruption, such as a nonrefundable hotel room that you never get to because of a crash
• Baggage loss and damage
• A 24/7 hotline for help

What Happens if You Don’t Get a Collision Damage Waiver?

If you have no insurance coverage and the rental car is wrecked or stolen, you’ll need to pay out of your own pocket to cover the loss. This will be an expensive proposition, so consider your options carefully before declining CDW coverage when you have no other applicable coverage.