Rental car insurance works differently than standard owner car insurance. Rental car insurance works differently than standard owner car insurance. Rental companies require renters to protect the vehicle against physical damage, and renters can meet this requirement in four ways: buy the rental company's collision damage waiver, use a personal auto policy with comprehensive and collision coverage, use a credit card that provides rental car coverage, or buy a third-party rental policy. Full coverage is not legally required to rent a car. A collision damage waiver, also called a loss damage waiver or LDW, is an optional waiver in which the rental company waives the renter's liability and deductible for physical damage to the rented car. A collision damage waiver covers at-fault collision damage, vandalism, theft, and towing fees, but it does not cover the other driver's injuries or property damage, negligent theft, or personal items left in the car. A collision damage waiver for an economy vehicle costs $15 to $42 per day, according to WalletHub's 2026 analysis. Renters can skip the waiver when they already hold coverage from a credit card or a personal auto policy, which usually extends to rentals in the United States and Canada, according to State Farm's 2026 guidance. Third-party insurers such as Bonzah, Allianz, and Insure My Rental Car sell rental coverage that adds baggage protection and trip interruption, with Bonzah's collision coverage starting at about $7.99 per day, according to Bonzah's 2026 pricing.
Table of contents
- How a Collision Damage Waiver Works
- What Does a Collision Damage Waiver Specifically Cover?
- What Does a Collision Damage Waiver or CDW Not Cover?
- What Happens If You Damage a Rental Car?
- How Much Does a CDW Cost?
- Collision damage waiver prices by company
- Should You Buy the Collision Damage Waiver?
- What Are Collision Damage Waiver Alternatives to Cover Rental Car Damages?
- Credit Card Provider Benefits
- Personal Auto Insurance Policy
- What is Third Party Car Rental Insurance?
- Does a CDW Work for International Rentals?
- What if You Want to Add More Coverage to a CDW for your Rental Car?
- What Auto Insurance Option is Right For Your Rental Car?
A collision damage waiver (CDW) is an optional protection that you buy from the rental car company. A CDW is also called a loss damage waiver or LDW. The waiver removes your financial responsibility for physical damage to the rented car, including your deductible. A CDW is not an insurance policy. The rental company agrees not to charge you for the damage.
Rental companies require renters to protect the vehicle against physical damage. A renter can meet this requirement in four ways. The renter can buy the rental company's collision damage waiver. The renter can use a personal auto policy that includes comprehensive and collision coverage. The renter can use a credit card that provides rental car coverage. The renter can buy a policy from a third-party rental insurer. Experian's 2024 reporting lists these same four options. Full coverage is not legally required to rent a car.
Paying with credit cards for damages on a car you don't even own isn't the best use of your money.
How a Collision Damage Waiver Works
Rental companies offer the collision damage waiver at the rental counter. You can decline the waiver every time. The right choice depends on the coverage you already carry.
Rental companies use the terms collision damage waiver and loss damage waiver almost interchangeably. A loss damage waiver (LDW) is technically broader than a CDW. A loss damage waiver combines collision damage protection with theft protection for the vehicle, according to WalletHub.
What Does a Collision Damage Waiver Specifically Cover?
A CDW is not comprehensive car insurance. The waiver applies only to physical damage to the rented car and several related charges.
A CDW exempts you from the following perils 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 (like insurance covering lost wages)
What Does a Collision Damage Waiver or CDW Not Cover?
The CDW excludes several costs and behaviors. Most exclusions involve another person's damages or careless behavior by the renter.
A collision damage waiver does not cover the following:
Another person's property damage
Another person's bodily injuries and medical costs
Speeding and intoxicated driving accidents
Driving on unpaved or gravel roads, or other uses that the rental agreement prohibits
Damage caused by an unauthorized driver, meaning any driver not listed on the rental agreement
Theft due to negligence, such as leaving the car running or unlocked
Certain parts of the vehicle may be damaged, including the tires, wheels, undercarriage, roof, windshield, interior, engine, and battery
Items within the car when they get lost or stolen, like child seats, keys, sporting equipment, GPS, or any personal belongings
What Happens If You Damage a Rental Car?
Report the damage to the rental company right away. The rental company documents the damage and opens a damage claim. If you bought the CDW, the waiver absorbs the repair charges and the loss-of-use charges. The waiver applies only if you followed the rental agreement. If you declined the CDW, the rental company bills you or your car insurance company.
How Much Does a CDW Cost?
According to WalletHub's 2026 analysis, a collision damage waiver for an economy vehicle costs $15 to $42 per day. The exact price depends on the rental company, the vehicle type, and the rental location.
A collision damage waiver adds a large share of the base rental price. According to AirportVanRental's 2025 analysis, a waiver commonly costs about $30 per day and can equal or double the base economy rate.
Read the waiver's terms before you assume a zero cost at claim time. Some CDWs carry their own deductible, which rental companies often call an excess. You still owe the excess after damage. A waiver with no excess costs more per day and removes that charge.
Collision damage waiver prices by company
Collision damage waiver prices vary by rental company and location. According to Experian's 2024 reporting, an economy car waiver at major airports costs about $25 per day. Enterprise lists its own collision damage waiver range from $19.99 to $100 per day, according to Experian's 2024 reporting. Request a quote from each rental company before booking, because rates change by date and location.
Should You Buy the Collision Damage Waiver?
The answer depends on the coverage you already carry.
Your policy includes collision and comprehensive coverage: Your policy usually covers rental cars in the United States and Canada. The CDW mostly duplicates that coverage. A claim on your own policy costs you your deductible and can raise your premium. The CDW avoids both costs.
You carry a high deductible: A $1,000 deductible can cost more than a week of CDW charges. The waiver removes your out-of-pocket risk.
You have liability-only insurance or no policy: None of your coverage pays for damage to the rental car. Buy the CDW, use a credit card with rental car coverage, or buy a third-party rental policy.
Your credit card covers rentals: Pay with that card and decline the CDW. Confirm whether the card's coverage is primary or secondary before you rely on the card.
You rent a truck, large van, or exotic car: Many cards exclude those vehicles. The CDW or a third-party policy covers the rental.
What Are Collision Damage Waiver Alternatives to Cover Rental Car Damages?
Sometimes, you can skip 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 credit cards include rental car coverage, including most American Express cards, according to State Farm's 2026 guidance. The coverage applies only when you pay for the full rental with that card. The coverage also applies only when you decline the rental company's collision damage waiver. Credit card coverage carries limits. Many cards cover rentals up to 15 consecutive days in the United States and up to 31 consecutive days abroad, according to State Farm's 2026 guidance. Many cards also exclude trucks, large vans, and exotic cars, according to State Farm's 2026 guidance.
Personal Auto Insurance Policy
A personal auto policy in the United States usually extends to rental cars in the United States and Canada, according to State Farm's 2026 guidance. A collision damage waiver does not raise your personal auto premium, because you buy the waiver from the rental company and file no claim with your own insurer. A personal auto claim works differently. You pay your deductible first. Your premium often rises after the claim, according to Hunter Insurance's 2025 guidance.
What is Third Party Car Rental Insurance?
A third option for covering damages following a rental car accident is to get automobile insurance from third-party insurance companies.
This would not come from the rental car company at the counter while signing your auto rental agreement or 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 (interior and exterior)
Baggage and belongings during travel
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 specializing in such insurance include 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 daily during the rental period and throughout the duration of your rental agreement.
Third-party insurers sell rental car coverage. Bonzah, Allianz, and Insure My Rental Car are three providers. Bonzah's collision damage coverage starts at about $7.99 per day, according to Bonzah's 2026 pricing. Bonzah's collision coverage protects the rental car up to $35,000 per incident, according to Bonzah's 2026 policy details. Bonzah's personal effects coverage protects belongings up to $500, according to Bonzah's policy details. Coverage limits and prices vary by provider and state.
Does a CDW Work for International Rentals?
A CDW from the local rental company usually provides your damage protection abroad. Most United States personal auto policies cover rentals only in the United States and Canada. European rental companies commonly build a CDW with an excess into the rental rate. The excess is a deductible that often runs $1,000 to $1,500, according to Rick Steves' car rental guidance. European rental companies also sell a super CDW, or zero-deductible option, that reduces the excess to zero or near zero for an extra $10 to $30 per day, according to Rick Steves' car rental guidance.
Mexico requires liability coverage from a Mexico-licensed insurer, according to Mexpro. A United States auto policy does not meet the Mexico requirement.
Check your credit card's terms before an international rental. Visa and Mastercard commonly exclude rentals in Israel, Jamaica, and Ireland, according to NerdWallet. American Express excludes rentals in Italy, Australia, and New Zealand, according to NerdWallet.
What if You Want to Add More Coverage to a CDW for your Rental Car?
CDW has excellent coverage but only applies to damage to rental cars, unlike comprehensive and collision insurance. That still leaves you and your passengers uninsured.
Rental companies and insurers offer these additional coverage types:
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 works the same as personal injury protection (PIP) insurance would by covering medical costs for yourself and your passengers.
Personal effects - Personal effects coverage insures belongings kept in the rental car. If belongings are stolen from the rental, personal effects coverage reimburses you up to the policy's limit.
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.
For example, if your personal car insurance policy limits aren't enough for the rental car, then a damage waiver or credit card coverage from your credit card company would be the way to go for more liability insurance or collision insurance.
Most credit cards provide secondary coverage, which pays after your personal auto insurance. Some cards provide primary coverage, which pays first without involving your personal insurer, according to Chase's rental car coverage guidance. Check your card's benefits guide to confirm which type applies. In that case, getting a waiver from the rental company or other insurers may be best 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.
The right choice keeps a rental car accident from raising your personal auto premium.
