Rental car insurance functions a little bit differently than standard owner car insurance.
Rental companies often have their own insurance and privacy requirements for their clients and their vehicles whenever they are rented out. Full coverage with comprehensive and collision car insurance is the standard for all rental car drivers, a simple liability insurance won’t be sufficient to cover the rental vehicle.
Your personal car insurance policy and personal auto policy deductible will carry over to the rental when you pick up the keys and sign off for it. However, rental car companies may still offer you auto insurance services during your time with their car. One of these services is collision damage waiver insurance or CDW.
A CDW is a great option if you don’t want to be on the line for a ton of expenses after a collision or accident in a rental car that would inevitably affect your personal car insurance premium. Because after all, if you are at fault in the accident, you already have the damage and injuries liability coverage of the other driver to contend with whether you decide to pay for them with your personal auto policy deductible or to file an insurance claim.
Paying with credit cards for damages on a car you don’t even own isn’t the best use of your money. That’s why it’s important to know everything about liability, collision damage waivers, collision damage insurance, and other types of insurance for rental cars.
What is a Collision Damage Waiver in Car Rental?
At the rental counter, you will be offered a collision damage waiver or CDW several times throughout the process of renting the car, always taking into consideration your privacy and your possibility to decline.
Car rentals can be based in your home state or wherever you are visiting. Countries in North, South, and Central America all have the same laws regarding auto insurance and rental cars, so the practice of offering collision damage waivers is consistent. As previously mentioned, your personal auto insurance can operate as coverage for the rental car. But, you can literally waive this option with a CDW optional coverage.
A collision damage waiver or CDW is an optional car insurance waiver (not a policy) in which you are not required to pay through your credit cards for the damages if your rental car is damaged in an accident. The collision damage waiver or CDW serves as permission that the rental company allows to waive liability from you.
Depending on the company and location, a CDW may also be referred to as a loss damage waiver or an LDW. Another popular name for it is loss damage waiver insurance, but this isn’t really accurate since a collision damage waiver doesn’t count as a car insurance policy.
A CDW will waive your liability and deductible covering any damage to the rental car for a somewhat budgeted price, but it’s not without its limits and catches.
What Does a Collision Damage Waiver Specifically Cover?
A collision damage waiver, or CDW, or loss damage waiver isn’t exactly comprehensive car insurance. In fact, a collision damage waiver, or CDW, or loss damage waiver is very specific in what it waives for the driver -and that is physical damage to the rented car. At the same time, there are some other types of damages you will be protected against.
A collision damage waiver or CDW will exempt you from the following perils when in a rental car:
- Collision and accident damage that was your fault.
- Comprehensive damage outside of driving like vandalism and theft.
- Towing fees.
- Lost pay for the renting company since they can’t rent the car out if it needs repairs (kind of like insurance covering lost wages).
What Does a Collision Damage Waiver or CDW Not Cover?
Now let’s talk about the inverse of the previous section with what collision damage waiver, or CDW, or loss damage waiver doesn’t provide coverage for. You may notice that these exceptions are based on the damages of the other driver(s) involved in the accident and careless behavior.
Here is what you will not be covered for with a collision damage waiver:
- Another person’s property damage.
- Another person’s bodily injuries and medical costs.
- Speeding and intoxicated driving accidents.
- Theft due to negligence, such as leaving the car running or unlocked.
- Certain parts of the car that may be damaged, including the tires, wheels, undercarriage, roof, windshield, interior, engine, and battery.
- Items within the car when they go missing like child seats, keys, sporting equipment, GPS, or any personal belongings.
How Much Does a CDW Cost?
The good news is that a collision damage waiver, or CDW, or loss damage waiver is relatively inexpensive. It depends on the rental company, but you can find collision damage waivers for anywhere from $10 to $30 for each day you are renting the car. This is about 40% or less of the rental price. You may be wondering, with CDW included, how much the rental car will now cost. The answer is not by a whole lot if you found collision damage waiver, CDW, or loss damage waiver cheap.
Let’s look at some low-cost rent-a-car examples and their collision damage waiver:
- Budget - The lowest daily rental that Budget can offer is $42 daily for economy vehicles. For one of their collision damage waivers, it would cost $17 per day. So, you would have the daily rental cost of $59.
- Enterprise - The lowest daily rental cost that Enterprise offers is around $44. For their collision damage, it costs $15 per day. If you rent an Enterprise economy car from Enterprise, you would be looking at the daily rental cost of $59.
- Hertz - $47 is the lowest daily rate that Hertz offers for their rental cars. Their daily collision damage waiver is $16. The total daily rental cost of a Hertz economy car with CDW is $63.
What Are Collision Damage Waiver Alternatives to Cover Rental Car Damages?
There are cases where you may be able to skip on a collision damage waiver because you already have coverage for rental car damages from other types of insurance.
This coverage requires approval and cooperation with car rentals and can come from:
- Credit-card provider benefits - Some of the major credit card companies, such as American Express, and major credit card networks have what can be described as rental car insurance. If you use your credit card as a payment method or to reserve your rental cars, you are able to use your credit benefits to cover any damages which may occur. Naturally, you decline the CDW and any other collision insurance when signing your rental agreement in order for it to work. However, there may be exceptions where your credit-card benefits will not cover the damages, such as a rental period of over two weeks or driving a truck or van as opposed to an economy make and model. A credit card can serve as either primary or secondary coverage source for liability insurance or collision insurance, meaning you may or may not have to file a claim form with your car insurance company.
- Personal auto insurance policy - If you are traveling domestically, then you can use your personal car insurance since it is active in both the United States and Canada. However, this may come at a cost. A CDW will not cause your personal auto insurance premium rates to rise after you use it as collision insurance. Meanwhile, when you file a claim using your personal car insurance, instead of paying for the damage until your reach your deductible, your car insurance policy premium rates will rise with most insurers.
What is Third Party Car Rental Insurance?
A third option you have for covering damages following a rental car accident is to get automobile insurance from third-party insurance companies. This would mean it would not come from the rental car company at the rental counter while signing your auto rental agreement or your car insurance provider back home.
Typically, these are insurance companies that specialize in insuring vehicles that are being rented while traveling. The best part is that it’s roughly the same price as a damage waiver and includes even more coverage for you and your additional drivers.
Third-party rental policies include coverage limits for the rental car itself (interior and exterior), baggage and belongings during travel, and trip interruption. This would mean that if your trip abruptly ends, you will be reimbursed for any cancellation fees and new travel plans to get back home. Insurance companies that specialize in such insurance are Bonzah, Insure My Rental Car, and Allianz.
Another plus side to third-party rental car insurance is the lack of deductibles. Like a CDW, third-party rental car insurance is paid on a daily basis during the span of the rental period and throughout the duration of your rental agreement.
These prices can range from $8 to $14, depending on how much liability coverage you choose. The exact liability car insurance coverage amounts vary. It can be around $35,000 to $40,000 for the rental car, $500 to $1,000 for baggage and belongings, and $500 to $1,000 for trip interruption or cancellation.
What if You Want to Add More Coverage to a CDW for your Rental Car?
We’ll close this piece out with other types of rental car insurance that insurers can offer to help you.
CDW is great coverage, but it only applies to damage to rental cars unlike comprehensive and collision insurance would. That still leaves yourself and your passengers uninsured.
Here are other types of rental car insurance to look into if you feel you don’t have enough protection:
- Supplemental liability - With SLI or supplemental liability insurance, the other driver you cause injury to is covered, so you don’t have to pay their medical bills or damage to their car. This functions like bodily injury and property damage rental car insurance policy.
- Personal accident - This functions the same as personal injury protection (PIP) insurance would by covering medical costs for yourself and your passengers.
- Personal effects - If you want your property kept within the rental car to be insured, then personal effects insurance policy is for you. If something is stolen from the vehicle, you can have peace of mind knowing you will be reimbursed by insurance companies.
What Auto Insurance Option is Right For Your Rental Car?
Deciding on how to insure your rental car is a matter of shopping around and finding the best coverage and premium for your situation insurers can offer you.
An example would be that if your personal car insurance policy limits aren’t enough for the rental car, then maybe a damage waiver or credit card coverages from your credit card company would be the way to go for more liability insurance or collision insurance.
But if your credit card can only serve as secondary coverage, it may just be best to get the waiver for the rental company or other insurers for an additional cost.
Weigh your automobile insurance policy and third-party insurers options carefully before planning your rental period to find the best value for adding more liability or other types of insurance to your rental car and don’t increase your personal car insurance premium in the case of a car accident.
Insurance Navy can help out to insure your Rental Car and have it covered for damages.
If you aren’t with Insurance Navy, can you really say you have good auto insurance coverage? Insurance Navy helps all drivers get the best auto insurance at the best rates. We offer free quotes online and over the phone at 888-949-6289. In need of further assistance? Stop in at one of our many locations to meet with an expert agent.