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At the rental car counter, you're asked if you want the collision damage waiver (CDW), which protects you from financial responsibility if the vehicle is damaged or stolen. Should you take it? You may need a collision damage waiver if your personal car insurance doesn't have collision and comprehensive coverage, has a high deductible or you want to avoid filing a claim on your personal policy. There are other times you may need a CDW, too.
What Is a Collision Damage Waiver?
A collision damage waiver for car rentals, sometimes called a loss damage waiver (LDW), waives your financial liability for damage to or loss of the rental car. However, a CDW doesn't absolve you from all risk. Here's what CDWs do, don't and may cover.
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Do I Need a Collision Damage Waiver for a Car Rental?
You may need a collision damage waiver when you rent a car in the following situations.
- You don't have car insurance. If you don't carry car insurance because you don't own a car, it makes sense to buy the CDW. Depending on what your homeowners, renters or health insurance covers, you may also want to buy other types of insurance that the rental car company sells. For example, you can buy personal accident insurance to cover medical costs for you and your passengers from an accident while driving the rental car, or personal effects insurance to cover items stolen from your rental car.
- You don't carry comprehensive or collision coverage. Some people don't bother insuring against damage to an older car that isn't worth very much. If you're one of them, you'll want a CDW to protect the rental car.
- Your personal car insurance has a high deductible. Relying on your car insurance to cover your rental car means you'll have to pay your deductible in the event of a claim. It may be worth buying the CDW if the cost is significantly less than your deductible—for instance, if you have a $1,000 deductible and the CDW would cost you $50.
- You don't want to file a claim with your car insurance. In some cases, filing a car insurance claim could lead to higher premiums. If you're worried about this—for example, you've filed other auto insurance claims recently—you can avoid the risk by purchasing the CDW.
- You plan to drive the rental car outside the U.S. or Canada. Car insurance issued in the U.S. generally doesn't cover you outside these countries. If you'll be driving in Mexico or Europe, for example, you'll need the CDW.
- The rental car is worth a lot more than your personal car. Renting a luxury sports car can be exciting, but can also pose a big risk if your personal car insurance is only sufficient to cover your 20-year-old Honda Civic. Buying the CDW protects you for the value of your rental car.
How Much Does a Collision Damage Waiver Cost?
The cost of a collision damage waiver varies depending on the vehicle you rent, your location and how much coverage you purchase, but generally ranges from $25 to $41 per day, with more valuable vehicles costing more. For example, Enterprise says its CDWs range from $19.99 to $100 per day.
CDW quotes for vehicles rented at the Los Angeles International Airport locations of Alamo, Avis and Hertz were about $25 per day for an economy car, $35 to $41 per day for standard SUVs and $25 to $41 per day for luxury cars.
Alternatives to a Collision Damage Waiver
Alternatives to buying a collision damage waiver include using your personal car insurance, renting the car with a credit card that provides rental car insurance or buying rental car insurance from a third-party company.
Personal Car Insurance
In most cases, the coverage and limits of your personal auto insurance also extend to vehicles you rent in the U.S. and Canada for personal use. However, before heading to the rental car counter, you should verify your coverage with your car insurance company to ensure you're adequately protected.
Check to make sure you have collision and comprehensive coverage and ask whether the policy covers rental car loss of use, administrative fees and towing charges. It's a good idea to get the details of your car insurance coverage for rental cars in writing.
Credit Card Coverage
Credit cards that offer travel benefits may provide collision damage waiver coverage for vehicles you rent using the card. You can check your card issuer's website, review your credit card agreement or call the company to see if this coverage is available and how it works. Typically, credit card rental car insurance covers damage to or theft of your rental car, as well as loss-of-use expenses. They may also cover towing fees and personal items stolen from the rental car. There's generally no deductible, and coverage extends to most countries.
Credit card rental car coverage is usually secondary coverage. That means you file a claim with your own auto insurance first, then turn to the credit card company to handle costs your auto insurance doesn't cover (which may include your deductible). However, if your credit card provides primary rental car insurance, you'll file a claim with the credit card company first, then file a claim with your personal car insurance for any amount left over.
The amount of CDW coverage offered can vary depending on your credit card's terms, so it's important to make sure you understand any limitations and requirements. For instance, the card may not cover cars rented for more than a month or certain types of vehicles. If you're looking for a new credit card with rental car coverage, Experian can show you credit card offers based on your credit profile.
Third-Party Rental Car Insurance
You can get rental car coverage from third-party insurance carriers such as Allianz, Bonzah and RentalCover. You'll need to buy this insurance before picking up your vehicle at the rental counter. Coverage can differ from one provider to the next, so it's important to understand what is and isn't covered before purchasing third-party insurance.
For example, Allianz's rental car insurance policy includes travel benefits such as 24/7 emergency assistance, lost baggage and trip interruption coverage. RentalCover's insurance covers loss-of-use fees, towing charges, lost keys and unusual vehicles such as motor homes. Bonzah offers personal accident insurance and supplemental liability insurance in addition to CDWs.
Protect Yourself When Renting a Car
Taking the time to explore your rental car insurance coverage options before your trip is a smart move. You'll enjoy your journey more knowing your finances are protected from risks to your rental car. Signing up for Experian's free credit monitoring service before your journey is also a good idea. Get alerts of important changes to your Experian credit report that could signal financial fraud, helping to protect your credit no matter where you go.