CDW Insurance Explained: What Every Car Renter Should Know

Renting a car is easy all the way up until you get to the rental counter and are asked the question, "Would you like to add CDW insurance? Some have taken it for granted, others have refused, and end up with costly repair bills after an accident.

When it comes to understanding Collision Damage Waiver (CDW), you could save hundreds, even thousands of dollars. This guide will tell you what CDW insurance is, how it works, and everything.

What Is CDW Insurance?

CDW is Collision Damage Waiver. Although, as the name suggests, CDW is not normally insurance in a legal sense. Rather, it is a contractual agreement between you and the rental company stating that if its rental vehicle is damaged or stolen, the company will cancel some or all of your financial liability, provided you comply with the rental agreement.

If you do not install CDW, you may have to pay:

• Repair costs

• Vehicle replacement costs

• Loss of rental income while the vehicle is being repaired

• Administrative fees

These can be extremely costly, depending on the rental company and country.

How Does CDW Work?

A Collision Damage Waiver is when you pay the rental company so that it does not charge you for damage to the vehicle covered by it.

It can be as simple as this:

Suppose you are driving a rental car and accidentally hit a parking pillar.

Without CDW:

You may have to pay the repair bill, which could be several thousand dollars.

With CDW:

Most or all of the repair costs are covered by the rental company, as per the rental agreement.

But each rental business features its own conditions, so it is crucial to read the agreement carefully.

What does CDW Support?

Coverage is different among different companies. CDW typically covers:

Collision Damage

The damage that may be caused by another vehicle or to a fixed object, the damages may also come from a rollover accident.

Scratches and Dents

Minor body damage (scratches, bumper damage, dents).

Theft of the Rental Car

Many rental companies offer theft protection as part of the CDW, or as part of a Loss Damage Waiver (LDW). Some sell theft protection as a separate service.

Vandalism

Many CDW contracts will also cover damage from vandalism.

Weather-Related Damage

Some agreements will cover hail, flooding, storms, or falling objects.

What is NOT included in CDW?

Many tenants think that CDW applies to all situations. It doesn't.

Common exclusions include:

Damage to Other Vehicles

Typically, CDW won't cover the cost of the other driver's vehicle if you cause a car accident with them.

An Injury to Another Person

Medical expenses or liability claims are not covered by CDW.

Personal Injuries

Medical expenses for the driver and passenger will be covered by Personal Accident Insurance (PAI) or health insurance.

Personal Belongings

What is taken from the inside of the rental vehicle is normally not covered.

Tires and Wheels

Some rental companies won't allow tire damage claims unless extra coverage is added.

Windshield and Glass

Often, broken windows or windshield chips are not considered.

Undercarriage Damage

Damage below the vehicle is usually not covered.

Engine Damage as a Result of Neglect/Negligence

Driving through flood water or using the wrong fuel may result in the waiver being rejected.

Unauthorized Drivers

This could affect the CDW if someone other than the renter's name on the rental agreement drives the vehicle.

Reckless Driving or Illegal Driving

Normally, the insurance will be cancelled if the car is driven:

• While intoxicated or impaired by drugs or alcohol

• For racing

• Off-road

• For illegal activities

CDW vs LDW: What's the Difference?

Many people are confused about the difference between CDW and LDW.

Loss Damage Waiver (LDW) is being sold by many rental companies instead of a typical CDW because it is one policy that protects against both collision and theft.

Is CDW the Same as Car Insurance?

No. This is one of the major misconceptions.

Car insurance is an insurance that is regulated insurance.

CDW is merely a contractual agreement that restricts the rental company's ability to bill you for some of the damage costs. Because this is a waiver, rather than an insurance, the specific coverage is determined more by the terms of the rental agreement than by insurance policies.

What's the price of CDW?

The price varies according to:

• Rental company

• Country

• Vehicle type

• Rental duration

The average rate is AED 36.73 to AED 128.54 per day, but it can be higher for luxury cars or for expensive car rentals.

If you are renting for a whole week, you may find that you end up paying a lot more for the extra CDW.

Do You Really Need (CDW)?

This varies according to the coverage you have.

You don't need the CDW if

• Personal auto insurance policies provide coverage for rental cars.

• Your rental car damage protection is provided by your credit card.

• Rental car coverage is part of your travel insurance.

Be sure to verify the information prior to rejecting the waiver, particularly if it's an international rental.

You should buy CDW if

• You don't have a car.

• You don't have a full coverage car insurance policy.

• You're traveling internationally.

• Rental cars are not covered by your insurance.

• Your deductible is very high.

• After an accident, you do not want to make a claim on your own insurance.

Does Your Credit Card Cover CDW?

A fair number of premium credit cards feature rental vehicle protection.

But some conditions should be taken into account, however:

• The rent will be charged to the eligible credit card.

• You're typically required to reject the rental business's CDW.

• Luxury cars, trucks, and motorcycles, in some countries, may not be covered.

• A few cards offer primary coverage; others offer secondary coverage.

Please read your card's benefit guide before using it.

Some Things to Consider Before Rejecting CDW

Be sure to check before you say "No" at the rental counter:

• Are rental vehicles included in your personal insurance?

• Does it have both collision and comprehensive coverage?

• Will filing a rental claim increase your insurance premium?

• Do you have primary or secondary rental coverage on your credit card?

• Are rentals outside of India included?

• What is the deductible?

Having these answers can save you from some unforeseen costs.

Most Frequently Made Errors by Renters

There are lots of costly blunders that renters make without knowing it.

These include:

• Assumption of liability of CDW.

• Assuming all credit cards provide rental insurance.

• Neglecting to follow the rules outlined in the rental agreement.

• Allowing an unlicensed driver.

• Driving on a road not allowed for vehicles.

• Not checking the vehicle before departing.

• Not taking photographs of any existing scratches.

A few minutes spent checking the vehicle to see if everything is right can prevent disputes upon return.

Tips to Save Money on a Rental Car Protection

Rather than automatically buying any of the optional protection packages, consider these steps:

• Review current insurance policy.

• Use a credit card benefits checker.

• Thoroughly read the rental company's damage policy.

• Research rental companies before you rent.

• Make a booking online, as protection packages are frequently lower cost than at the desk.

• Have pictures of the car before and after it is rented.

With just a little preparation, you'll save money and stress.

Final Thoughts

One of the most misinterpreted products of car rental companies is Collision Damage Waiver. While it can provide valuable financial protection against damage or theft of the rental vehicle, it is not a substitute for liability insurance and doesn't cover every situation.

When considering or rejecting CDW, make sure to look at your current coverage for auto insurance, travel insurance, and credit card benefits. Knowing exactly what is included will help you avoid paying for things you don't need and help you make an educated decision at the rental counter.