We’ve all experienced that sinking feeling when renting a car and trying to decide whether to get the insurance or not.
It seems like a no-win situation; you either pay for the additional rental car insurance, or decline it and leave in fear you may be involved in an accident and go broke paying for the damages (which is the exact feeling they try to instill in us).
Waivers Aren’t Insurance
The two main options available to you at the rental car insurance counter are the “Collision Damage Waiver,” known in the industry as the “CDW,” and the “Loss Damage Waiver,” known as the “LDW.”
Both of these options do not constitute insurance of any kind.
Rather, they are sold as a promise from the rental car company to not hold you responsible for paying the costs of physical damage suffered by the car you rent while it’s in your possession.
[Read more about the difference between collision and comprehensive coverage.]
Collision Damage Waiver (CDW)
The collision damage waiver is for exactly that…when your rental car experiences a collision with another car or object.
Tip: Colliding with an animal, such as a deer, does not count as collision as far as insurers are concerned.
But, what happens if the car is not damaged by a collision? Perhaps it gets damaged by a flood or hail? Enter the Loss Damage Waiver.
Loss Damage Waiver (LDW)
The Loss Damage Waiver takes the place of your comprehensive coverage on an auto insurance policy. Comprehensive coverage is often referred to as “other-than-collision” nowadays, as insurers attempt to make it easier for us to understand their terminology.
As discussed above, the car you rent can easily be damaged by something other than running into another vehicle.
For example, the car may get stolen. With no auto insurance policy in place, if your rental ride gets stolen, the LDW would be your best friend!
Final Word on Waivers
Depending on your existing personal auto insurance policy, and what state you reside in, you may be able to reject this offer without a care in the world…with one stipulation.
In some states, like Texas for example, your auto policy’s property damage liability coverage will protect you in the event you damage a rental car.
The way the policy is interpreted, your liability for damage to others’ property, in this case the rental car, is covered up to your policy limits.
Basically, it means damage to the rental car is not treated any differently than damage you cause to someone else’s car while driving your own vehicle.
The one stipulation here is that your auto policy has high enough property damage limits to cover the cost of your rental car.
For example, if your policy limits cover $25,000 in property damage liability, and you wreck a $40,000 rental car, you will be on the hook for the remaining $15,000 if the car is completely destroyed.
I highly recommend contacting your insurer or independent agent to determine your individual coverage and the laws in your state before renting a car and making any assumptions.
It’s important to be informed in order to avoid being taken advantage of, or ending up with a huge bill at the end of a vacation for damaging the rental car.
At the end of the day, the rental car company is counting on your lack of knowledge, hoping you will sign on the dotted line and cough up the money.
Tip: Some credit card issuers provide Collision Damage Waiver coverage on rental cars for damage due to collision or theft.
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