It's not always easy to figure out if you need insurance when you're renting a car. If you're reserving a car online, you might notice an optional fee for either insurance or something called a CDW or LDW. CDW stands for "collision damage waiver." It isn't technically insurance coverage. It's a waiver of responsibility. Another term used interchangeably with CDW is "loss damage waiver" or LDW.
Neither CDW nor LDW will fully spare you from the fallout of a major car accident, but they can help in other key ways.
- 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.
- A waiver may be able to keep your primary insurance policy from being affected if you get in an accident while driving a rental car.
How Do CDW and LDW Waivers Work?
You won't be held accountable or you'll have limited liability for any loss or damage to a rental car if you purchase a waiver. That can be very helpful if you find yourself in an accident while driving it, regardless of who's at fault.
It may sound like a no-brainer, but some fine print does exist on a CDW or an LDW. The precise scope of coverage can vary by company, as can any exclusions. Your actions as a renter can also modify it. It's key to know the rules of your car rental agreement. Follow them closely if you've paid extra for a damage waiver.
The purchased waiver won't apply if you violate your rental agreement in any way.
Coverage Limited to Rental Vehicle
A CDW covers all damage to the rental vehicle without charging a deductible. But the coverage is limited to only that vehicle. The CDW isn't relevant if you're in an accident and cause damage to property or other vehicles. That damage must be covered either by your personal insurance policy or by any supplemental insurance you purchased.
Certain other limits are imposed by the states in which you rent the vehicle. "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" for those with LDWs, according to Hertz's rental requirements. The renter isn't 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 an LDW varies based on location, as well as by rental company and the type of car you're renting. It could be as little as $9 a day in New York for cars costing less than $30,000. But the cost of an LDW could be as high as $500 in California for some companies and for higher-end cars.
Should I Buy a Waiver?
A CDW or LDW can be valuable compared to any other coverage options if your personal insurance policy has a high deductible. Coverage from any other source most likely will still leave you responsible for rent during the days the rental car is being repaired. These costs can add up very quickly. Adding insult to injury, you're paying to fix a vehicle you'll never again benefit from driving. But you're covered with a waiver.
An accident would impact your personal auto insurance rates. But having a waiver means that the rental company would take care of all formalities. Your premiums may not go up.
A driver on vacation might hit a guardrail and put a large dent in the passenger side door of their rental vehicle. If they purchased a collision damage waiver, the driver would not have to worry about a deductible or paying for repairs. It will pay for the repairs in their entirety. Their personal policy may still provide coverage without a CDW, minus their deductible. That's money out of pocket. The rental company can still charge rent fees during the time the vehicle is being repaired.
Compare all these factors when you're making a decision. It might not be worth paying for CDWs if you spend a lot of time in rental cars and have good insurance with a low deductible. It takes only about two weeks of driving a rental to spend as much on a CDW as your deductible would cost if you're paying $20 per day for a CDW and your personal policy has a deductible of $250.
There are advantages to purchasing the collision damage or loss damage waivers when you rent a car. But they also come at a cost. Do the math to decide whether the extra protection is worth it when you rent a car.