Rental car insurance functions a little bit differently than standard owner car insurance. Rental companies often have their own insurance requirements for their vehicles whenever they are rented out. Full coverage with comprehensive and collision insurance is the standard for all rental car drivers.
Your personal car insurance policy 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 insurance services during your time with their car. One of these services is a collision damage waiver (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. Because after all, if you are at fault in the accident, you already have the damage and injuries of the other driver to contend with.
Paying 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 collision damage waivers for rental cars.
What is a Collision Damage Waiver?
You will be offered a collision damage waiver several times throughout the process of renting the car. The car rental company 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 insurance and rental cars, so the practice of offering collision damage waivers is consistent. As previously mentioned, your auto insurance can operate as coverage for the rental car. But, you can literally waive this option with a CDW.
A collision damage waiver is an optional insurance waiver (not a policy) in which you are not required to pay for the damages if your rental car is damaged in an accident. The waiver serves as permission that the rental company allows it. 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 an insurance policy. A CDW will cover 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 isn’t exactly comprehensive insurance. In fact, it’s 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 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 Not Cover?
Now let’s talk about the inverse of the previous section with what collision 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 property.
How Much Does a CDW Cost?
The good news is that a collision damage waiver is relatively inexpensive. It depends on the rental company, but you can find CDW 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 it 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 Else Can be Used to Cover Rental Car Damages Other Than a Collision Damage Waiver?
There are cases where you may be able to skip on a collision damage waiver because you already have coverage for rental car damages. This coverage can come from either your credit card company or your own auto insurance policy. These options require approval and cooperation with the rental company.
They work in the following ways:
- Credit card provider benefits - Some of the major credit card companies have what can be described as rental car insurance. If you use your credit card as a payment method or to reserve your rental car, you are able to use your credit benefits to cover any damages which may occur. Naturally, you decline the CDW 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, meaning you may or may not have to file a claim with your 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 insurance rates to rise after you use it. Meanwhile, when you file a claim using your personal car insurance, your insurance rates will rise.
What is Third Party Car Rental Insurance?
A third option you have for covering damages following a rental car accident is to get insurance from a third party. This would mean it would not come from the rental car company or your insurance provider back home. Typically, these are 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.
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. 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. These prices can range from $8 to $14, depending on how much liability coverage you choose. The exact 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?
We’ll close this piece out with other types of rental car insurance that can help you. CDW is great coverage, but it only applies to damage of the rental car like 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 (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.
- 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 is for you. If something is stolen from the vehicle, you can have peace of mind knowing you will be reimbursed.
What Option is Right For You?
Deciding on how to insure your rental car is a matter of shopping around and finding the best coverage for your situation. An example would be that if your personal car insurance limits aren’t enough for the rental car, then maybe a damage waiver or credit card company would be the way to go. But if your credit card can only serve as secondary coverage, it may just be best to get the waiver. Weigh your insurance and third-party options carefully before planning your rental period to find the best value.
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.