If you are planning your next getaway down South, or maybe your current vehicle is in the shop for repairs, you may be considering renting a vehicle. Rental car insurance is not something many of us spend much time thinking about until we need it. If you’re wondering, “Do I need to purchase rental car insurance?” it’s best to check if you already have coverage. Does your credit card or personal insurance policy already offer you coverage? If not, what type of insurance coverage do rental companies offer? What is a Collision Damage Waiver anyway? Let’s take a look at the types of coverage you need when renting a car, and break down what a Collision Damage Waiver (CDW) is, and if it differs from a Loss Damage Waiver (LDW).
What is rental car insurance?
Rental car insurance typically offers four options, including:
- Collision Damage Waiver (CDW) / Loss Damage Waiver (LDW): Protects the rented vehicle itself. Both of these rental insurance coverages protect you from charges related to theft and collision of the rental car. On your primary insurance policy, it’s called collision and comprehensive.
- Personal Effects Coverage (PEC): PEC covers your personal belongings.
- Personal Accident Insurance (PAI): Covers you and your passengers.
- Liability Insurance (LI): Covers any injuries to others (third parties) and damages to another person’s property or vehicle as a result of a collision.
What is a Collision Damage Waiver (CDW)?
A Collision Damage Waiver (CDW), or Physical Damage Waiver, is a particular type of insurance that is often offered when you are renting a vehicle and is sold by a rental car company.
What does a Collision Damage Waiver cover?
A CDW typically covers losses from any damage to a rental car while it is in your possession. For example, if you drive around town and get into a fender bender, you won’t have to pay anything out of pocket for repairs.
A CDW will usually also cover the following types of car damage:
- Accident
- Vandalization
- Theft
- Fire
- Weather-related damage
The coverage also includes any damage to the car while parked, and accident-related towing. Rental agency coverage will typically also cover the agency’s administrative fees and any daily lost revenue due to the vehicle being out of rotation (also called Loss of Use).
What doesn’t the Collision Damage Waiver cover?
Collision Damage Waivers won’t cover:
- Damage to other cars (LI)
- Bodily injury to other people (PAI)
- Injuries to you or your passengers (PAI)
- Theft or damage of your personal items in the vehicle (PEC)
Cost of coverage: Typically, rental companies will charge anywhere from $9 to $30 per day.
Is it required? No, it’s not required. However, be sure to check you have coverage elsewhere before declining coverage. For instance, many credit cards insure the rental car for CDW and LDW but read your card’s fine print. Your auto insurance policy may also cover it if you have collision and comprehensive insurance (and OPCF/QEF/SEF 27 endorsement).
CDW policies typically exclude windscreen and tire repairs, as well as undercarriage, roof, interior, window, and side mirror damage. The renter will be liable for the full cost of those repairs.
What is a Loss Damage Waiver (LDW)?
A Loss Damage Waiver (LDW), sometimes referred to as CDW, is a combination of CDW and Theft Protection. This means that you will be covered for car replacement if your rental car is stolen during the period of your rental. It is often offered when you are renting a vehicle and it is sold by a rental car company. It typically covers damage/loss should an accident occur. Usually, a car rental company will charge you about $20 per day for this type of protection.
In most countries, LDW and CDW come packaged together. However, in the USA and Canada, these are often purchased separately.
Credit cards and CDW/LDW
Often credit cards have a feature called “rental car insurance” and it is, in fact, a loss-damage waiver for rental vehicles. An important thing to know about it is that it does not cover third-party liability and your bodily injuries. Also, to use it, you need to pay for your rental car with this credit card and decline the Collision Damage Waiver offered by the car rental company. This protection often has a time limitation (e.g. car rental period should not be longer than 48 consecutive days). You need to check in advance with your bank to see if your card’s insurance covers it.
Your auto insurance and CDW/LDW
If you feel that you need more protection than your credit card offers, or you do not want to spend $15-20 per day for the CDW offered by a car rental company, you should look at your car insurance. Many providers offer additional pieces of protection (also called endorsements) that are designed to protect your rental car. They may only cost you an additional $30 per year on top of your usual premiums.
Important key points to remember:
- LDW or CDW does NOT cover you for damage to another vehicle, or if the accident results in injuries.
- The LDW or CDW coverage lasts the length of the rental car period.
- You could decline CDW if you have personal auto insurance with collision and comprehensive coverage. Or, a credit card with primary rental car insurance coverage.
When should you purchase rental car insurance?
Even though many financial experts advise against purchasing a rental agency’s insurance, there is no simple answer. You can have varying degrees of rental car insurance coverage from your car insurance policy, your travel credit card, your cash back credit card, and even your home or tenant’s insurance. It’s important to know what level of coverage you have before you visit a rental car agency so you don’t feel pressure at the desk.
Here are some instances where you should consider buying car rental insurance:
- You don’t have car insurance and your credit card doesn’t provide coverage
- Your auto insurance policy doesn’t have the right endorsement
- You are a high-risk driver and it’s not worth another claim
- Traveling for business
- Renting sports cars, trucks, luxury, or specialized vehicles
- Your policy only covers the minimum
- International travel (outside North America)
Bottom line
Deciding if a Collision Damage Waiver or Loss Damage Waiver is worth it depends on your coverage and how much you value the benefit of adding a layer of protection. If you don’t have personal auto insurance or a credit card with coverage, then you should seriously consider paying for a CDW. What’s most important is that you take the time to understand your coverage options and their limitations so you can make an educated decision. Speak with one of our isure representatives to ensure that you’re not paying for extra coverage you don’t need.
