Car-Rental Insurance and the Collision Damage Waiver (CDW)

When you rent a car, you are liable for a very high deductible, sometimes equal to the entire value of the car. Fortunately, there’s usually more than one way to limit your financial risk in case of an accident.

It’s (usually) up to you, however, to decide how to cover the risk of damage to or theft of the car itself. You have three main options, all described below: buying a “collision damage waiver” (CDW) through the car-rental company (easiest but most expensive), using your credit card’s coverage (cheapest), or getting collision insurance as part of a larger travel-insurance policy.

Car-Rental Company CDW

The simplest solution is to buy a CDW supplement from the car-rental company. This coverage technically isn’t insurance; rather, it’s a waiver: The car-rental company waives its right to collect a high deductible from you in the event the car is damaged. Note that this “waiver” doesn’t actually eliminate the deductible, but just reduces it. CDW covers most of the car if you’re in a collision, but usually excludes the undercarriage, roof, tires, windshield, windows, interior, and side mirrors.

CDW generally costs $10–30 a day (figure roughly 30 percent extra). Sometimes the CDW charge itself is a little less when combined with theft/loss insurance as part of an “inclusive” rental rate — it’s often cheaper to pay for this kind of coverage when you book than when you pick up the car.

When comparing rental options online, beware that some European rental agencies quote “basic” rates that include CDW/theft coverage. (In this case, it’s not an optional extra, so you can’t decline it.) If these CDW-inclusive rates seem too good to be true, they probably are: The unwaived deductible is almost certainly especially high (expect $2,000–3,000)…so you’ll have to spend extra to buy the “super CDW” anyway to get the deductible down to a reasonable level.

Given these costs, the alternatives to paying for the rental company’s CDW are worth considering carefully: credit-card coverage or collision coverage through your travel-insurance provider.