Auto Rental Collision Loss Damage Insurance: What You Need To Know

Auto rental collision loss damage insurance, also known as collision/loss damage insurance, is an optional insurance coverage that protects you in the event that a rented car is damaged or stolen. This insurance is typically offered by rental car companies as an add-on to the rental cost and can provide peace of mind in case of any accidents or incidents during the rental period. The cost of this insurance can vary depending on the rental company, location, vehicle type, and other factors, but it is generally not very expensive. It is important to note that this type of insurance only covers damage to the rented car itself and does not include liability coverage for damage to other cars or property, or injuries to people. For comprehensive protection, renters may also need to consider additional insurance options.

Collision damage waiver (CDW)

The car rental company will usually have its own insurance, but CDW generally refers to agreements and coverages limiting anything the renter has to pay. CDW can also cover the missed rental income from a vehicle when damages are being repaired. If the renter has no rental insurance or commits an unprotected act like driving under the influence, they may have to pay the car rental company for the time the car cannot be rented.

CDW is an optional coverage that renters can buy for an average of $20 to $30 per day. Buying CDW coverage means that the rental company waives its right to hold the renter responsible for any accidental damage to the car. If you do not purchase the CDW option, the rental company can pursue you for any costs associated with repairing or replacing the car.

If you turn down a CDW, the rental car company can charge you for more than car repairs. They also usually charge for loss of use, towing, diminished value, and administrative fees. While your own insurance or a credit card’s coverage may pay for some of these costs, the expenses can vary by company.

Rental companies typically offer a CDW when you make an online reservation for a rental car and again when you pick up the vehicle. When you purchase a CDW, the rental car company gives up the right to charge you for damages to the rental car. But there are usually a few exceptions, for instance, for tire and side mirror damage, or for “gross negligence,” meaning you were speeding, racing, or driving while intoxicated. The names used for CDWs vary, so study the details carefully before signing.

Loss damage waiver (LDW)

LDW offers protection in the event that a rental car is damaged or stolen. These waivers typically include a deductible. LDW is also sometimes referred to as Collision Damage Waiver (CDW). CDW covers damage to the rental vehicle in the case of an accident, while LDW offers the same protection as well as coverage if the car is stolen. These terms are sometimes used interchangeably, so it is important to pay attention to the fine print to know what kind of coverage you are getting.

LDW is often included as a benefit on some credit cards, meaning it does not need to be purchased separately. However, it is important to note that LDW provided by credit cards may only offer secondary coverage, meaning it kicks in after your personal car insurance policy. In addition, LDW provided by credit cards may only cover rentals for a limited number of days, typically up to two weeks (14 days) or a month (31 days).

When considering whether to purchase LDW from a rental company or rely on LDW provided by a credit card, it is important to carefully review the terms of coverage and ensure that it provides adequate protection.

Rental car insurance and personal insurance

Rental car insurance can be purchased from the rental company, or you may already be covered by your personal auto insurance or credit card. It's important to check your existing policies before purchasing additional rental car insurance.

Rental car insurance

Rental car insurance can be purchased from the rental company and usually includes the following:

• Liability coverage: Covers you for damages or injuries you cause while driving the rental.
• Loss/collision damage waiver: Releases you from responsibility for damage that occurs to the rental car, including theft and vandalism.
• Personal accident insurance: Protects against injuries to you and your passengers while driving a rental car.
• Personal effects coverage: Covers your personal items if stolen from a rental car.

Personal auto insurance

Your personal auto insurance policy will usually cover rental cars, but it's important to check with your insurer to confirm. Comprehensive and collision coverage on your personal policy will generally extend to a rental car, and your liability coverage will also apply. However, you will still be responsible for your deductible, and filing a claim on your auto insurance policy could raise your premium.

If you only have the minimum required liability coverage, consider purchasing additional coverage from the rental company, as state minimums typically have low liability limits.

Credit card rental car insurance

Many credit cards offer rental car insurance as a benefit, but it's usually secondary coverage, meaning your personal auto insurance policy will pay out first. To be covered by your credit card's rental car insurance, you must pay for the full rental cost with that card and decline the rental company's collision damage waiver.

Standalone rental car insurance policies

If you don't want to purchase rental car insurance from the rental company and aren't covered by your personal auto insurance or credit card, you can buy a standalone policy from a third-party insurer. These policies can provide primary coverage, meaning they pay out before your personal auto insurance, and they often include additional benefits like 24-hour emergency assistance.

Credit card rental car insurance

Many credit cards offer rental car insurance, which can be a valuable benefit. This type of insurance typically covers damage to or theft of the rental car, but it's important to note that it usually acts as secondary coverage, meaning it kicks in after your personal car insurance policy. However, in some cases, credit card rental car insurance can provide primary coverage, making it the first source of coverage in the event of an accident.

When considering credit card rental car insurance, it's crucial to understand the specifics of the coverage offered, as it can vary between different cards and networks. Here are some key points to keep in mind:

• Eligibility: To be eligible for credit card rental car insurance, you typically must pay for the full rental cost (plus fees) with the eligible credit card. Additionally, the cardholder is usually required to be the primary renter listed on the rental agreement.
• Coverage Type: Most credit card rental car insurance offers secondary coverage, which means it supplements your personal car insurance policy. However, some cards provide primary coverage, which can be beneficial if you don't have a personal car insurance policy.
• Coverage Limits: Credit card rental car insurance usually covers collision damage or loss, theft of the vehicle, towing charges, and loss-of-use charges. However, it typically does not include liability coverage for damage to other vehicles or property, personal injuries, or medical expenses resulting from an accident.
• Excluded Vehicles: Credit card rental car insurance may not cover certain types of vehicles, such as luxury or recreational vehicles, antique cars, or motorcycles. Be sure to check the specific exclusions of your card's policy.
• Geographic Limitations: Coverage may vary for international rentals, with some countries being excluded from the insurance policy.
• Duration of Coverage: There is usually a limit on the number of consecutive days that the rental car insurance will cover, often up to two weeks (14 days) or a month (31 days).
• Claims Process: In the event of an accident or damage, you will need to contact your card issuer to initiate the claims process. This may differ depending on whether you have primary or secondary coverage.

Before relying solely on credit card rental car insurance, it is essential to carefully review the terms and conditions of your specific card's benefits guide. Additionally, it is worth considering purchasing additional coverage, such as liability protection, from the rental car company if needed.

Rental car insurance and liability

When you rent a car, you will likely be offered a collision damage waiver (CDW) or loss damage waiver (LDW) by the rental company. This is not actually insurance but a waiver stating that the company won't hold you responsible for any accidental damage to the car. The CDW/LDW usually includes a deductible, and the cost of purchasing it can add up to $30 per day to your rental bill.

Before purchasing this waiver, it's worth checking whether you're already covered by your personal auto insurance policy or your credit card. Many travel rewards credit cards come with collision/loss damage insurance, which covers the costs of repairing or replacing a rental car in the event of theft or accident. However, this type of insurance usually only applies if you pay for the full rental cost with that card.

It's important to note that collision/loss damage insurance only covers damage to the rental car itself and does not include liability coverage for damage to other cars, property, or people. If you're concerned about this, you may want to consider purchasing supplemental liability insurance, especially if you have minimum liability coverage on your auto policy or are travelling in a country where your personal policy doesn't apply.

Liability insurance typically covers damages to other people's property and medical costs for their injuries if you are legally responsible for an accident. In the US, every state requires a minimum amount of liability insurance on car insurance policies, so you may already have some level of coverage. However, if you're travelling overseas, your US auto insurance policy might not provide any coverage, and you may need to purchase additional liability insurance.

When deciding whether to purchase rental car insurance or rely on your existing coverage, consider the following:

• The extent of your existing auto insurance policy and whether it covers rental cars.
• Whether your credit card offers rental car insurance and what the terms and conditions are.
• The likelihood of needing liability coverage for damage to other people's property or injuries.
• The cost of purchasing rental car insurance versus the potential costs of repairs or replacement if the rental car is damaged or stolen.

Frequently asked questions