Damage waiver

Damage waiver or, as it is often referred to, collision damage waiver (CDW) or loss damage waiver (LDW), is optional damage insurance coverage that is available to you when you rent a car.

Car rental companies treat the CDW as a waiver of their right to make the renter pay for damages to the car.^[1]

In many countries, it is a legal requirement to have CDW insurance included in the basic car rental rate. It covers the rented car. Some rental companies also offer liability insurance and coverage of towing charges. Terms and prices vary. Alternatives to the CDW include other car insurance policies, some coverage from credit card issuers (Visa, MasterCard, etc.,) and some travel insurance.

Risks addressed

Liability. If the car damages property or injures someone, the customer or other insurance must pay for the damages (liability). US car rental companies sometimes include minimum liability insurance required by law in the basic rental charge. Hertz includes it in all states except California, but will subrogate any damages against the driver (meaning the car is insured to the state minimum but the driver will pay for all damages paid by Hertz).^[2] Avis includes it in all states except California and Texas, at least for renters who lack their own coverage.^[3] Other companies do not publicize where they include liability insurance in the basic rental charge. Some car rental companies offer more liability insurance for a fee.^[4][5]

Collision, theft, other damage. When a customer does not pay the car rental company to waive damage, and a rented car is stolen, or damaged by accident, vandalism, weather (hail), etc., the customer or other insurance must pay to the rental company the full cost of repair, plus administrative charges and, in some states, loss of use.

The rental company's damage waiver normally covers accidental damage and towing a damaged vehicle, as long as the renter complies with the rental contract (such as authorized drivers, locations, no racing). Waivers may also cover theft, vandalism, loss of use, and liability. The renter often has a choice among different coverages for different fees.

Damage waivers are not necessarily complete. They may have deductibles (also called excess) and limits on the amount covered.^[6] Liability coverage always has limits.

The descriptions above come from rental company websites, under headings like Policies, FAQ, Coverage, or More.^{[7][8][9][10]}

Damage Waivers can be bought from the car rental company in most countries, or through a car hire excess insurer in the UK,^[11] or through travel insurers.^[12] Coverage from the car rental company may be required if the renter lacks proof of coverage elsewhere.^[13][14]

Insurance or not?

CDW meets the basic definition of insurance, since it transfers some risk from the car renter to the rental company. However rental companies do not call it insurance, since it is a waiver between the renter and the company that the company waives their right to charge the renter for valid damages to the vehicle. Rental companies are not licensed or regulated as insurers. There are also no claims made. Rental companies treat CDW as a waiver of their right to make the renter pay for damage to the car.^[1]

Credit card coverage of damage waiver

Cards issued in the US, and Trinidad and Tobago

Some credit card issuers (Visa, MasterCard, etc.,) offer insurance for theft or damage to rented cars. A few of the cards (noted in the table below) offer "primary" insurance, so the driver does not need to file a claim with his or her personal insurance. More cards offer "secondary insurance." This means that if the renter has personal or business vehicle insurance with appropriate coverage, then that insurance will pay first. Then the credit card issuer will pay the primary insurance's deductible and will address any large claims above the primary insurance limit.

If the renter has no other vehicle insurance for the specific claim (no insurance at all, or not in the relevant country, or no collision insurance, etc.), the credit card company (if it offers coverage) will pay the whole amount, up to its limits.

All four credit card companies listed below cover collision damage with some of their cards. The main difference among the cards is that Discover covers nothing else; Visa and some MasterCards and American Express cards also cover theft, while other MasterCards and American Express cards include theft, vandalism, hitting a deer or chipping a window (sources at bottom of table).

Other issues important to some renters are that Discover covers only the cardholder, not helpful when people share a car rental. Visa and MasterCard only cover rental contracts of 15 days or less (not even the first 15 days of longer rentals). Some American Express and MasterCards are not useful on dirt or gravel roads, since they exclude "damage sustained on any surface, other than a bound surface such as concrete or tarmac".^[15] Some Discover cards exclude private roads, such as shopping centers, many subdivisions, business parks, private college campuses, etc.^[16]

MasterCard and Visa in the United States say they cover "Physical damage and/or theft", but an introductory paragraph for some MasterCards^[17] and all Visa^[18] cards limits this to "collision or theft," so vandalism and hail are excluded. It may be ambiguous whether deer impacts and glass chips are covered as "collisions." MasterCards from Bank of America and MBNA generally have a simpler opening paragraph, which leaves coverage in place for any physical damage.^[15]

Even among these brands, some cards lack coverage entirely, especially debit cards and cards with low credit limits. The AmEx Platinum Cash Rebate card, for example, has no coverage. MasterCard "Standard" cards lack coverage, while "Premier", "Gold" and "Platinum" cards vary in their coverage. Citi® / AAdvantage®, Citi ThankYou®, Citi® Dividend or Citi CashReturns® MasterCard-branded cards are notable for providing coverage worldwide without geographic exclusions,^[19] while most other MasterCard, Visa and American Express cards exclude coverage in Ireland, Israel, Jamaica.

These schemes apply to cards issued in the US, Trinidad and Tobago,^[20] and apparently nowhere else. In addition, no credit card will cover a rental that is being billed to a third party, such as in the event that an insurance company is being directly billed for the rental.

The following table is an effort at a summary, though not guaranteed. Coverage is complex and changes periodically. Telephone staff do not know the changes. Formal insurance policies govern and are not easily available to cardholders, who are only given summaries, like the links below.

"Loss of use" and administration fees are often advertised as covered by credit cards. However, credit card companies pay these items only if the rental car company provides proof. If rental car company does not provide proof, there seems little reason for the renter to pay either.

See also

• Vehicle insurance

References