Collision/Loss Damage Waiver: What It Is & Should You Buy It?
After a long flight you make your way to the luggage carousel and finally the rental car counter. At this point, the last things you want to face are difficult decisions and hard sales tactics. The agent at the rental counter attempts to talk you into buying a damage waiver to cover you in the case of an accident or other event that causes damage to your rental car. What should you do? Is it worth the extra cost that will be added to your rental?
In an unfamiliar car and city, maybe during a holiday, often using a GPS to navigate, it’s easy to see why rental car accidents are more likely. One survey found that 27% of men and 10% of women have experienced damage to rental cars. Although this may reflect years of rental car use for each individual, the numbers are still a little frightening.
When you are deciding whether to purchase a damage waiver, there are two key considerations: (1) whether you are already covered by existing insurance and, if not, (2) if the benefit of having a damage waiver is worth the cost. Because you can get the same type of coverage through your standard auto insurance or a credit card, it is usually a good idea to decline the damage waiver. We’ll walk through the specifics of what a damage waiver covers, what it might cost, and how to decide whether to purchase this coverage.
What Is a Collision Damage Waiver?
A Collision Damage Waiver (CDW) is an optional service sold by a rental car companies to cover you in case of an accident or other event that causes damage to your rental car. The waiver covers only the rented vehicle and means that the rental company waives its right to pursue you for damage. Your rental car company may call it a Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW), and—even though it is not actually a form of insurance—it may also be referred to as Collision Damage Waiver or Loss Damage Waiver insurance.
Some potential costs are covered under damage waivers that may not be included in your other insurance policies. For example, a damage waiver usually provides “loss of use” coverage when the car is under repair and thus cannot be rented out, as well as administrative and towing fees.
If you are renting a car in the United States, the damage waiver offered to you will typically cover all of these costs without the need for you to pay a deductible. If you are traveling overseas and decide to rent a car however, it is possible that the waiver includes a deductible that you would have to pay in the event of an accident, which may be up to several thousand dollars. The higher the deductible, the less value the waiver may potentially have for you.
Keep in mind that a damage waiver only covers rental car damage. It will not cover any expenses if you cause an accident that damages other vehicles or results in injuries. In addition, a waiver won’t cover risky behaviors that result in damage, such as taking your rental car off road, speeding, or driving drunk. Similarly, loss or theft of the vehicle is not covered if you left it running outside the hotel. Though rare, be careful of less obvious exclusions such as damage to the windshield, tires, and mirrors.
How Much Does It Cost?
The cost of a damage waiver can range from a modest fee to nearly doubling the total rental price. Normal costs are $10 – $30/day for economy vehicles, or 25 – 40% of the base rental price.
The table below provides the daily cost of a damage waiver from different rental car companies at different locations. The price you are quoted may differ, so its best to shop around and read your rental agreement.
|Location||Company||Daily Rental Cost||Daily Damage Waiver Cost||Total Cost|
|Las Vegas, NV||Budget||$39||$26||$65|
|New York, NY||Budget||$43||$9||$52|
|Los Angeles, CA||Budget||$40||$10||$50|
Note: Quotes were obtained for a day in November 2014 for an economy-sized vehicle.
Deciding Between a Damage Waiver and Other Alternatives
When it comes to purchasing a damage waiver you may have two alternatives—your credit card or existing auto insurance policy will likely cover rental car mishaps at no additional cost.
Credit Card Benefits
Perhaps the best option is to leverage the benefits that are provided to you through your credit card. All four major credit card networks—Mastercard, VISA, Discover, and American Express—provide some form of coverage. Check WalletHub’s analysis to identify the best credit cards offering rental car insurance coverage
There are a few things you’ll need to keep in mind when using your credit card for damage coverage. First, make sure that you use the credit card to reserve the car AND pay for the reservation. Keep in mind that these benefits are only offered on credit cards—a debit or prepaid card with a Visa or Mastercard logo will not offer coverage. Second, you must decline any damage waiver that comes with your rental to utilize your credit card benefits. Read through the rental car agreement to make sure an inferior waiver is not included in the contract.
Credit card benefits will not cover you in all situations, however. If you rent a car for a long period of time (over 15 days in the U.S. and 31 days internationally), rent certain vehicles (trucks or vans), or engage in reckless behavior behind the wheel, damages may not be covered by your credit card. One last important consideration is for your credit card’s limit. The rental company may charge the cost of the damage to your card while they seek reimbursement from your credit card company.
Personal Auto Insurance
Another alternative to a damage waiver is using your existing auto insurance, since coverage is likely to be included in your policy. Insurance will typically cover car rentals in the U.S. and Canada, but not rentals in other countries.
There are circumstances, however, when purchasing a damage waiver may make more sense than relying on your existing car insurance policy. For example, if you purchase a damage waiver rather than filing an insurance claim, you don’t have to worry about the possibility of your insurance company raising your rates.
In addition, your car insurance policy may have a high deductible that you have to pay before other expenses are covered. However, if you also have rental car benefits associated with your credit card, then that may cover cost of the deductible and make this a moot point.
If you decide to use one or both of these alternatives instead of purchasing a damage waiver, keep in mind that your insurance provider or credit card company must come to an agreement on the cost of repairs with the rental car company. Failure to do so may mean that you are responsible for the difference.
We know there are a lot of things to consider, and deciding whether a damage waiver is the right choice for you can be confusing. Walking through the series of questions below may help:
The Bottom Line
For most people, buying a damage waiver is not worth the money. While it may seem prudent to buy just to be safe, the purchase of loss or collision damage insurance may cancel or be redundant with other forms of insurance you already have.
On the other hand, there may be certain situations where paying a comparably small fee to buy a damage waiver may avoid enough of a headache to make it worthwhile. Do a little research and know how your existing car insurance policy covers when it comes to rental cars, and whether your credit card offers this type of coverage as a benefit.
Regardless of your decision, consider taking ‘before’ pictures of your rental vehicle when you pick it up, especially if you see any existing damage. When you drop the car off, have the attendant do a walk around the vehicle. If that isn’t possible, take ‘after’ pictures as well. Doing this can document any damage that was already present and give you peace of mind that you can prove no damage occurred to the car while you were renting it.
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