Should You Get a Collision Damage Waiver When Renting a Car?

You just got off a plane after two eight hour layovers and very little sleep. When you go to pick up your rental car, the attendant asks if you would like to buy a Collision Damage Waiver. All you hear is "acts like insurance" and "additional fees" so you say no. Did you make the right decision? Read on to learn how a Collision Damage Waiver (CDW) works, the pros and cons of getting one, and other ways you can get insurance coverage for a rental car. (Get basic information on Rental Car Accidents.)

What is a Collision Damage Waiver?

A collision damage waiver is not insurance. In fact, rental agencies are not allowed to advertise the CDW as insurance as they are not licensed to sell insurance. The collision damage waiver does provide additional coverage on the rental vehicle. Essentially, a collision damage waiver is the rental company's waiver of their ability to make the renter pay an extremely high deductible (sometimes up to the value of the vehicle) for damage to the vehicle. The deductible doesn't usually disappear altogether, but purchasing the CDW usually brings it down to under $1,000.

Remember that the CDW only applies to damage to the rental car. It does not act as insurance for (and has no effect on) other property damage or personal injury claims.

Pros of Getting a Collision Damage Waiver

• shifts most vehicle damage costs to the rental company (aside from a deductible)
• usually pays the full value of the vehicle if damage occurs, as opposed to "actual cash value," and
• usually covers the rental car company's "loss of use" of the vehicle (the income they would derive from renting the vehicle out to other customers if it weren't damaged.

Cons of Getting a CDW

• increases the rental cost by as much as 30 percent
• often includes coverage gaps that must be paid by the driver (may not cover certain parts of the vehicle, such as damage to the windshield or tires)
• the CDW may simply overlap coverage you already have through other sources (more on this below), and
• you may still be held liable for any injuries that occur.

Collision Damage Waiver Alternatives

Credit card companies, travel insurance, and car insurance policies all offer alternatives to collision damage waivers.

Your Credit Card Company

• Some credit cards include rental car collision damage coverage for free, others require a small fee
• In addition to collision coverage, many credit cards also offer coverage for vehicle theft and weather damage.
• Your card company will usually pay the vehicle's "actual cash value," not the as-new value.
• Not all cards cover all countries (or all areas of all countries).

Your Travel Insurance Policy

If you purchase a travel insurance policy for your trip, it will almost always include car insurance coverage that provides you with more protection than you would get by purchasing the CDW.

Your Car Insurance Policy

• Your existing car insurance coverage usually applies to the rental vehicle.
• If the vehicle is deemed a "total loss" after an accident, the rental agency may demand the new value of the vehicle rather than the blue book value used by insurance companies.

Protect Yourself by Getting the Right Coverage

You do not have to purchase the collision damage waiver offered by your rental agency. However, it is a good idea to make sure the coverage you have from some other source will protect you in the case of an accident.

Always read the fine print of the car rental contract before signing it, and consult your lawyer if something doesn't seem right. If you do purchase a collision damage waiver or other rental coverage and something happens, your lawyer can help you make sure the rental agency holds to the terms of the waiver.