6 years experience in the personal financial industry
Theresa is a writer and former financial advisor with experience helping clients solve money challenges. She uses her expertise to clarify complex personal finance concepts.
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If you’ve ever rented a car, you may have heard of a collision damage waiver, or CDW. This optional coverage limits your financial liability if your rented car is damaged or stolen. But you may not be sure if the extra protection (and cost) is worth it.
Here’s what you need to know about collision damage waivers to help you decide if this coverage makes sense for you.
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What is a collision damage waiver?
A collision damage waiver is a type of optional protection that waives your financial responsibility for rental car damage.[1] Collision damage waivers generally also cover vandalism and theft of the car. They generally don’t cover bodily injury expenses.
The types of damage a collision damage waiver covers vary by insurance company. Some waivers may not include protection for certain parts of a rental vehicle, such as tires. You may want to consider a collision damage waiver if you don’t have your own car insurance or if you don’t want to use your personal auto policy for rental car claims.
Common terms associated with collision damage waiver
Here’s a list of common terms related to collision damage waiver insurance:
Collision damage waiver: A collision damage waiver helps cover damages to your rental car, even if you caused them. It’s sometimes referred to by its acronym, CDW.
Loss damage waiver: A loss damage waiver is also known as LDW insurance. Loss damage waiver and collision damage waiver are often used interchangeably.[2]
Comprehensive and collision insurance: Comprehensive and collision insurance cover damage from various incidents, including crashes with other vehicles, theft, and extreme weather. These coverages are both part of a full-coverage policy. You may not need a CDW if you carry full-coverage insurance on your personal auto policy.
Do you need a collision damage waiver?
Since a CDW carries an additional cost, it’s important to understand whether you truly need it. A CDW isn’t always necessary, depending on your specific situation and existing insurance coverage.
For example, in some cases, your personal auto policy covers you while driving a rental car. In that case, you may not need a CDW. Even if your policy covers your rental car, you may still want a CDW to limit your out-of-pocket expenses and avoid excessive insurance claims on your personal auto policy.
Good to Know
You may also opt for a CDW if you have a credit card that offers a CDW as a cardholder benefit. It’s crucial to check your credit card coverage before buying a separate CDW. Once you get a CDW from a rental agency, that CDW may cancel out the coverage offered through your credit card. Some American Express cards include a CDW.
Risks of not having a collision damage waiver
The biggest risk of not having a collision damage waiver is the possibility of high out-of-pocket expenses if your rental vehicle is damaged or stolen. Another potential risk is an increase in your premium if you need to file a rental car claim with your personal auto insurance company.
Process of claiming a collision damage waiver
If you damage your rental car, you should file a police report if needed and contact the insurance company right away. Waiting too long to report the damage may result in claim denial. Be sure to take pictures of the damage to the rental vehicle, as the insurance company may request them and other information related to the damages in order to process your claim.
Collision damage waiver vs. insurance
Collision damage waivers aren’t technically insurance. They’re waivers that relieve you of financial responsibility for covered damage to your rental car. CDWs are optional add-ons to standard rental insurance. You may purchase a CDW if your personal car insurance policy doesn’t cover your rental car or if you prefer to keep your personal and rental coverage separate.
A collision damage waiver may make sense if you want stronger protection while driving a rental vehicle. Standard rental car insurance policies may only offer liability insurance, which protects the other driver. Not adding collision coverage could leave you financially vulnerable in the event of a car accident.
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Collision damage waiver pros and cons
Before getting a collision damage waiver for your rental car, consider some advantages and drawbacks:
Pros
Financial protection: The main benefit of getting a CDW on your rental car is the extra financial protection it offers. With a CDW, you don’t have to worry about owing money if you get into a fender bender in your rental car.
Peace of mind during travels: A CDW helps you feel more confident behind the wheel because you know you’re protected against unexpected events.
Extra layer of protection: The standard insurance that rental car agencies offer may not be enough protection, which is why a collision damage waiver can be helpful.
Cons
Possible hidden costs: A CDW may include hidden costs, such as deductibles. Make sure you understand the costs involved before signing on the dotted line.
Misunderstandings and miscommunications: Collision damage waivers have complicated rules and exclusions. It’s crucial to ask your agent any questions you have about the coverage up front and read the fine print to ensure your coverage matches your expectations.
Collision damage waiver FAQs
If you’re thinking about getting collision damage waiver coverage, this additional information may help you make a decision.
How much does a CDW cost?
The cost of a CDW varies by company, location, and vehicle type, but it generally ranges from $10 to $40 per day. The best way to find the right deal for you is to shop around and request quotes from different companies. You may get a better price for a CDW if you get it at the time of reservation versus adding it later.
Do you need a CDW to rent a car?
No, you don’t need a CDW to rent a car. CDWs are an optional add-on to standard rental car insurance policies.
What does a CDW cover?
A CDW generally covers damages and theft of a rental car. It also may cover loss of use charges. It’s important to read the terms and conditions to understand what you’re getting and not getting when you purchase a CDW.
Is a CDW worth it?
A collision damage waiver may be worth it if you don’t have a personal auto insurance policy or have a policy that doesn’t cover rental cars. CDW insurance can help limit your out-of-pocket expenses in the event of an accident and provide greater peace of mind on the road.
Does a CDW cover scratches?
It depends on the company. For example, Enterprise, one of the largest car rental companies in the world, says its damage waiver covers minor damage, such as scratches and dents.
Is a collision damage waiver necessary if you already have personal auto insurance?
Purchasing a collision damage waiver may not be necessary if you have a personal insurance policy. Rental car damage may be covered under your own insurance, specifically comprehensive insurance and collision insurance.
Are there any exclusions or limitations to what a CDW covers?
Collision damage waivers have specific exclusions and limitations. For example, the CDW sometimes doesn’t cover tires and certain interior damage. Additionally, CDWs typically don’t include liability coverage.
Can a CDW be added retroactively to an existing rental car agreement?
You generally can’t add a collision damage waiver after your rental period begins. But exact rules vary by car rental company. For example, Enterprise allows you to add insurance at any time during your rental period, but it may result in additional fees.
Theresa Stevens is a personal finance writer based in Boston, Massachusetts. Her work has been featured in Forbes Advisor, Bankrate, and more. As a former financial advisor, she has first-hand experience helping people solve their money challenges. When she's not writing, you'll find her trying out new karaoke spots or planning her next trip abroad.
7+ years in business and financial services content
Chris is a seasoned writer/editor with past experience across myriad industries, including insurance, SAS, finance, Medicare, logistics, marketing/advertising, and many more.
Konstantin has led data teams across multiple industries, including insurance, travel, and biology. He’s led Insurify’s engineering team for more than three years.
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