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
- What is a Collision Damage Waiver in Car Rental?
- What Does a Collision Damage Waiver Specifically Cover?
- A collision damage waiver or CDW will exempt you from the following perils when in a rental car:
- What Does a Collision Damage Waiver or CDW Not Cover?
- Here is what you will not be covered for with a collision damage waiver:
- How Much Does a CDW Cost?
- Collision damage waiver prices by company
- 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?
- What if You Want to Add More Coverage to a CDW for your Rental Car?
- Here are other types of rental car insurance to look into if you feel you don't have enough protection:
- What Auto Insurance Option is Right For Your Rental Car?
Rental car insurance functions 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.
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.
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 an excellent option if you don't want to be responsible for expenses after a collision or accident in a rental car that would inevitably affect your personal car insurance premium.
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 essential 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 of declining.
Auto insurance laws and rental rules differ from country to country across North America, Central America, and South America. Most personal auto policies in the United States extend coverage only to the United States and Canada, according to State Farm's 2026 guidance. Rental companies in each country set their own coverage and waiver requirements.
Your personal auto insurance can operate as coverage for the rental car. But you can waive this option with an optional CDW 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 allows the rental company to waive liability from you.
Depending on the company and location, a CDW may also be called a loss damage waiver or an LDW. Another popular name is loss damage waiver insurance, which must be more 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. However, it's not without limits and catches.
What Does a Collision Damage Waiver Specifically Cover?
A collision damage waiver, CDW, or loss damage waiver isn't comprehensive car insurance.
In fact, a collision damage waiver, or CDW, or loss damage waiver, is particular 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 (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, CDW or loss damage waiver doesn't provide coverage.
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 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
How Much Does a CDW Cost?
The good news is that a collision damage waiver, CDW, or loss damage waiver is relatively inexpensive. 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.
You may be wondering, with CDW included, how much will the rental car will now cost? The answer is only a little if you found collision damage waiver, CDW, or loss damage waiver cheap.
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.
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.
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 has excellent coverage but only applies to damage to rental cars, unlike comprehensive and collision insurance. That still leaves you 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 works 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 a personal effects insurance policy is for you. If something is stolen from the vehicle, you can have peace of mind knowing insurance companies will reimburse you.
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.
Don't increase your personal car insurance premium in the case of a car accident.
