When renting a car, it's not always easy to figure out if you need insurance for it. When reserving the car online, you might notice an optional fee for either insurance or something called a CDW or LDW. CDW stands for collision damage waiver, and it technically is not insurance coverage. It's a waiver of responsibility. Another term used interchangeably with CDW by rental car companies is loss damage waiver (LDW).
Though neither CDW or LDW will fully spare you from the fallout of a major car accident, they can help in other important ways. Here's how.
- Rental car companies use "collision damage waiver" (CDW) and "loss damage waiver" (LDW) interchangeably, so read the contract for details.
- CLWs and LDWs do not cover damage done to other vehicles in an accident with the rental vehicle.
- If you get in an accident while driving a rental car, a waiver may be able to keep your primary insurance policy from being affected.
How Do CDW and LDW Waivers Work?
By purchasing such a waiver, you will be not be held accountable or have limited liability for any loss or damage to a rental car. That can can be very helpful if you find yourself in an accident while driving it, regardless of who is at fault.
Sounds like a no-brainer, right? Well, some fine print does exist on a CDW or a LDW. The precise scope of coverage, as well as any exclusions, can vary by company, and can also be modified by your actions as a renter. It’s important to know the rules of your car rental agreement and follow them precisely—especially if you’ve paid extra for a damage waiver.
If you violate your rental agreement in any way, the purchased waiver will not apply.
Coverage Limited to Rental Vehicle
It's important to understand that while a CDW typically covers all damage to the rental vehicle without charging a deductible, that coverage is limited to only that vehicle. If you are in an accident and cause damage to property, including any other vehicles, the CDW is not relevant. That damage will need to be covered either by your personal insurance policy or by any supplemental insurance you purchased.
There are certain other limits to the coverage that are imposed by the states in which you rent the vehicle. For example, according to Hertz's rental requirements for those with LDWs the "responsibility for loss or damage to the car from vandalism unrelated to theft will not exceed $500.00 in California and $2,500.00 in Nevada," and the renter is not responsible for theft regardless of purchasing the LDW unless the theft is the renter's fault.
How Much Does It Cost?
The price for a CDW or a LDW varies based on location, rental company, and the type of car you are renting. For example, in New York it could be as little as $9 a day for cars costing less than $30,000 while in California the cost of an LDW could go up to $500 for some companies for higher-end cars.
Should I Buy a Waiver?
In comparison to any other coverage available to address the physical damage, a CDW or LDW can be valuable, especially if your personal insurance policy has a high deductible. As well, coverage from any other source most likely will still leave you responsible for rent during the days the rental car is being repaired. Those costs can add up very quickly. Adding insult to injury, you’re paying money to fix a vehicle you’ll never again benefit from driving. With a waiver, however, you’re covered.
Ordinarily an accident would impact your personal auto insurance rates, but having a waiver means that the rental company would take care of all formalities and your premiums may not go up.
For example, a driver on vacation hits a guardrail and puts a large dent in the passenger side door of his rental vehicle. The driver would not have to worry about a deductible or paying for repairs if he purchased a collision damage waiver, which will pay for the repairs in their entirety. Without a CDW, his personal policy may still provide coverage, minus whatever the deductible is, and the rental company still can charge rent during the time the vehicle is being repaired.
When making your decision, compare all these factors. If you have good insurance and a low deductible, it might not be worth it to pay for a CDW, especially if you spend a lot of time in a rental car. For example, if you're paying on average $20 per day for a CDW and your personal policy has a deductible of $250, it takes only about two weeks of driving a rental to spend as much on a CDW as your deductible would cost.
There are advantages to purchasing the collision damage or the loss damage waivers when you rent a car, but they also come at a cost. Do the math carefully to decide whether the extra protection is worth it when you rent a car.