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Collision damage insurance, or collision damage coverage, is a form of auto insurance that protects the renter from the financial responsibility of damage to the vehicle. A collision damage waiver is the most common type of coverage while renting a vehicle, though there are alternatives.
What Is a Collision Damage Waiver?
According to Investopedia, a collision damage waiver or a CDW is coverage sold by car rental companies to protect you, the renter, when you are involved in an accident or the rental vehicle is damaged. Some companies refer to this coverage as a loss damage waiver or LDW, collision damage waiver insurance, or loss damage waiver insurance.
Car rental companies typically offer collision damage waivers on several occasions throughout your rental process. The first time you’re offered CDW is usually when you reserve your rental car, then again when you pick your vehicle’s keys up from the rental counter. In most cases, CDW is automatically included in your rental agreement, and you must opt-out of the coverage if you don’t want to pay the add-on fees or are already covered another way.
What Collision Damage Waivers Cover
The collision damage waiver affords protection to the renter of a vehicle that covers damages to the rental vehicle. Should the car be damaged in any way, the renter will not be responsible for repair costs. The CDW covers damage from theft, vandalism, and traffic accidents, but rarely covers bodily injury liability caused by a traffic accident, per SmartTravel.
It’s important to remember that a CDW only covers the damage to your rental vehicle. The waiver does not cover any liability for damages or injuries resulting from a traffic accident you have caused. You won’t be covered when committing risky acts such as driving drunk, speeding, or off-roading with your rental. Additionally, theft of the vehicle will not be covered if you left it running out of sight. Keep an eye out in your rental agreement and CDW for other non-obvious exclusions that may cost you later. Some of these exclusions include damage to the windshield, tires, and mirrors.
A CDW usually offers loss of use insurance when the rental vehicle is under repair and covers some administrative and towing fees. That being said, according to RentalCars, there is a lot that a CDW does not cover, including:
- Windows
- Mirrors
- Wheels and tires
- Undercarriage
- Engine
- Cabin interior
- Dead battery
- Your personal belongings
- Lost keys
- GPS
- Child seats
- Ski racks
How Much Does a Collision Damage Waiver Cost?
A variety of factors will affect the cost of your CDW, including where you’re driving and the type of car you’re renting.
WalletHub found costs for collision damage waivers can vary from a minimal fee to double the cost of renting the vehicle alone. Typical costs are 25 percent to 40 percent of the base rental price for economy vehicles.
Here is the cost of a CDW through three major rental companies:
| Company | Cost of CDW per day | Cost of rental per day | Total cost per day |
|---|---|---|---|
| Enterprise | $15 | $44 | $56 |
| Hertz | $16 | $47 | $58 |
| Budget | $17 | $44 | $59 |
Other Options
Creditcards.com suggests, when purchasing a CDW, you may want to consider one of three alternatives, your personal car insurance policy, which may cover rentals at no additional cost already, your credit card, and a third-party CDW.
1. Credit Cards
Each of the four large credit card companies, VISA, American Express, MasterCard, and Discover, offers collision damage coverage. Coverage of this type is usually secondary, meaning you would have to file a claim with your personal car insurance before you can file with your credit card company. However, your credit card coverage should pay for your deductible, towing, and other fees.
To be eligible to use the coverage provided through your credit card, you must reserve the car and pay for the reservation with the same credit card. A prepaid or debit card will not provide coverage even if it has a VISA or MasterCard logo. Credit card collision insurance won’t cover you in a variety of situations, including:
- Renting a car for more than 15 days in the U.S or 31 days internationally
- Renting certain vehicles like trucks or vans
- Driving recklessly
2. Personal Auto Insurance
Another option worth considering is using your personal auto insurance because coverage is typically included in your policy already. Auto insurance policies will likely only cover car rental in the U.S. and Canada. There are some situations where purchasing a CDW would be better than an existing policy. When filing a claim with a collision damage waiver, your insurance premiums won’t go up. Additionally, your car insurance policy may require a deductible that a CDW or collision insurance through your credit card wouldn’t.
Here are the best reasons to stick with your existing auto insurance policy:
- Your liability can pay for damages to another vehicle or property if you’re at fault for an accident.
- Your collision coverage already covers damages to a rental vehicle.
- Your comprehensive coverage would cover damages to a rental caused by weather or theft.
3. Third-Party Car Rental Insurance
Large online travel agencies like Priceline or Expedia normally offer collision damage coverage for about $10 per day. A third-party company provides this type of insurance coverage. This costs much less than a normal CDW but just like with credit card coverage, you will have to pay upfront and then claim reimbursement. You may be able to buy third-party coverage separately. Companies such as Bonzah will provide this coverage for $9 a day.
Take a few pictures of the rental before embarking on your travels and after you’ve dropped the vehicle off or have an attendant do an inspection. This way, you will have documentation of any already present damage before taking responsibility for the car. These coverage options are here to give you peace of mind while traveling or when your car is in the shop.
Check this out if you need additional information, resources, or guidance on car insurance.
Sources:
What is Online Third Party Insurance for Car?
Does Car Insurance Cover Repairs?
What is Collision Damage Waiver in Car Rental?
9 Nasty Truths About Car Rental Insurance
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