If you are an infrequent car renter, signing the rental car agreement can be a confusing experience. The agent will strongly suggest that you should add CDW insurance to your bill. But what is CDW?
There’s a glimmer of doubt in your mind. After all, adding the CDW is going to make the rental car significantly more expensive. Can you salvage that great deal you got on your rental car? Suddenly, you’re not sure. Do you need collision protection? And what is CDW exactly?
Car Rental Definition of CDW
Basically, the Collision Damage Waiver (sometimes called a Loss Damage Waiver) covers any damages to the rental car. It’s a confusing term because the waiver is not for you, the driver. The waiver is for the car rental company.
When you sign the waiver, the car rental company waives the right to hold you responsible. When you decline the waiver, you are giving the rental company the right to hold you responsible.
What Does the CDW Cover?
The CDW covers the cost of making necessary repairs. For example, it pays to fix a dent or scratch or even if the vehicle is totaled.
In some cases, the CDW or LDW also covers associated costs, such as the rental company’s loss of use while the car gets repaired, its diminished value after an accident, towing charges, and various other fees that could otherwise be charged back to you.
Certainly, buying the CDW buys peace of mind, but it can also add up: the cost of a CDW or LDW typically runs from $20-$30 a day for a rental. Several states—such as California and New York—limit the cost of a CDW, but in most of the country, you can expect to pay double-digit dollars every day you rent the car.
Note, however, that a new law in California regarding rental car CDW went into effect in January 2022. Rental car companies are now able to charge up to $25 per day for over-the-counter collision insurance. (Previously, collision insurance for economy and compact cars were capped at $11 per day, while intermediate, standard, and full-size were capped at $17).
How to Know If You’re Already Covered
The good news: Most drivers don’t need to buy the CDW—but some people may still want it anyway. The chances are that you’re already covered through your auto insurance, your credit card or both.
Does your auto insurance cover car rentals?
If you own a car, then your own insurance—if you have a comprehensive coverage plan—gives you those same benefits as a CDW with a rental car. (Several states, including Minnesota, Louisiana and Massachusetts, even require automobile insurers to cover rental cars in all their policies.)
But, there’s a hitch. You’re only covered within the limits of your policy for your own vehicle. So if you drive a luxury car back home, and are opting for a modest budget car on your trip, you’re in pretty good shape for coverage. But if your everyday car is an aging compact and you’ve decided to treat yourself to a sporty convertible, you might be putting yourself in a bind.
To be sure about where you stand, call your insurance provider before your trip and ask a few questions. Do you have collision and comprehensive coverage on your policy, and does it to extend to a rental? Are there any limits on cars you’d be covered for? Are you covered for Loss Of Use and Diminution of Value, are there any risks if you need to file a claim for damage related to a rental?
In most cases, if your own policy covers a rental, you would just need to pick up the cost of the deductible in case of an accident. Even if you have coverage, some folks don’t want to use it—say, if your own coverage has a big deductible, or if you’ve already made a claim in the past year and don’t want to risk another incident that would hike up your premiums.
Does your credit card provide a car rental insurance benefit?
And what if you don’t own a car? You still may be covered through your credit card if car rental insurance is a cardholder benefit—but know that some credit cards have recently removed this benefit, so always check before embarking on a trip.
If you have more than one credit card, it’s important to know how to choose the right card to pay for your car rental.
Again, you can call your credit card company or look it up online if you’re unsure. Before your trip, it’s important to find out whether your card offers primary coverage (which supersedes coverage from your auto insurance policy) or secondary coverage (which only kicks in once your auto insurance deductible is paid and coverage limits are hit).