It’s easy to forget that when you rent a car, you’re “borrowing” a vehicle that costs tens of thousands of dollars from a major corporation. When you pick it up, you expect the car to be in excellent condition, with no dents, dings or scrapes. So what happens if the car is damaged during your rental? Even if it wasn’t your fault, the rental car company is, of course, going to expect someone to pay for the repairs. And since rental car companies know the fear of getting stuck with a hefty repair bill makes renters nervous, they have every reason to sell you extra coverage at the counter.
We’ve already written about the excessive charges for gas and the markup on tolls that car rental companies charge. So why would we assume that all of a sudden, the same companies are selling insurance at a reasonable price?
It’s not that the coverage they sell is never useful. It’s that you may already have coverage from your personal auto insurance policy, a credit card, a third-party policy or another source. Knowing what coverage you already have allows you to make an informed decision instead of making one under pressure at the counter. I’ll also share a trick that lets you avoid the hard sell entirely.
But first, what is the car rental company trying to get you to buy?
Most of the information listed below only applies to cars rented in the United States. Rentals in other countries have different rules and restrictions. Please note that I’m neither an insurance agent nor an expert, so I suggest reading the policies, including, but not limited to, the parts about policy limits, deductibles and exclusions.
The Short Answer
For many U.S. renters, the rental car company’s LDW/CDW is not automatically necessary. You may already have coverage through your personal auto insurance, a credit card, a third-party policy or an add-on benefit like American Express Premium Car Rental Protection.
But you should not blindly decline it either. Credit card rental coverage usually does not include liability coverage, and some policies exclude certain vehicle types, countries, long rentals, peer-to-peer rentals or business rentals. The right answer depends on what coverage you already have and where you’re renting.
Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW)
These names are often used interchangeably, and for most renters, they mean the same basic thing. When you purchase a loss damage waiver or collision damage waiver, the rental car company agrees not to look to you for payment if the car is damaged or stolen during your rental.
Interestingly enough, this is not insurance. The vehicle is already insured by the rental car company, or if it’s a large company, it may be self-insured. Think of the waiver as a “free pass” that gets you off the hook if something happens to the vehicle while it’s in your possession.
As part of the rental agreement, you can be held responsible for more than just the damage to the car. You may also be charged for the rental revenue the company loses while the vehicle is out of service for repairs. Depending on the amount of damage, those charges can add up quickly, so it pays to have some sort of backup plan.
Buying the LDW/CDW from the rental car company is one way to cover those expenses if something happens. But it is not the only option. There may be other ways you’re protected that you may not know about.
Auto Insurance
If you own or lease a car and have auto insurance in the U.S., your policy may extend to a rental car when it’s being used for personal travel. In many cases, the rental vehicle will have the same coverage as your primary vehicle, and you’ll be responsible for the same deductible and coverage limits as if it were your own car.
The downside is that filing a claim for damage to a rental car can affect your policy the same way a claim involving your own car would. Your premiums could increase, or in some cases, your insurer could decide not to renew your policy.
Before relying on your personal auto insurance, it’s worth checking whether your policy covers rental cars, what deductibles apply and whether there are any exclusions for certain vehicle types, business use or rentals outside the United States.
Credit Cards
Many U.S. credit cards provide coverage for rental car damage, but the details vary by card. Personal cards generally cover personal rentals, while business cards may cover rentals when the car is being rented for business use. In most cases, you need to pay for the full rental with the card and decline the rental company’s LDW/CDW for the credit card coverage to apply.
There are two main types of rental car coverage that credit cards provide: secondary and primary.
Secondary coverage is what many credit cards offer. It generally covers expenses you are responsible for after your other coverage has been used. That means you may have to file a claim with your personal auto insurance first, and the credit card coverage may then reimburse eligible out-of-pocket expenses, such as your deductible or certain loss-of-use charges. If you don’t have personal auto insurance, secondary coverage may act more like primary coverage, but you should confirm that with your card’s benefits guide.
Primary coverage is more valuable. If your card provides primary rental car coverage, you generally do not have to file a claim with your personal auto insurance first. Instead, the credit card benefit can pay eligible costs for damage to or theft of the rental vehicle, up to the policy limits.
That said, credit card rental car coverage is not unlimited. It usually does not cover liability, injury to you or others, damage to other vehicles, certain expensive or exotic vehicles, long rentals, peer-to-peer rentals or rentals in some countries. You need to read your card’s current guide to benefits before relying on it.
Some personal cards that currently provide primary coverage for damage to a rental vehicle include:
- Chase Sapphire Preferred – primary coverage, currently up to $60,000
- Chase Sapphire Reserve – primary coverage, currently up to $75,000
- United Explorer Card – primary coverage, currently up to $60,000 for most eligible vehicles
- United Club Card – primary coverage, currently up to $60,000 for most eligible vehicles
- Chase Ritz-Carlton Card – primary coverage, but check your current guide to benefits for limits and exclusions
- Capital One Venture X – primary coverage
Some business cards may also provide primary coverage when the rental is for business use. Examples include:
- Chase Ink Business Preferred
- United Business Card
- United Club Business Card
Because card benefits can change, don’t rely on a list from a blog post, even this one. Before renting, check the current benefits guide for the card you plan to use.
Additional Credit Card Insurance
Many American Express cards include secondary rental car coverage, but American Express also offers an optional product called Premium Car Rental Protection.
If you enroll in this program and use an enrolled American Express card to pay for an eligible rental, the rental can be covered with PRIMARY coverage. The price is typically $19.95 to $24.95 PER RENTAL, depending on the coverage level and where you live. Some states have lower pricing.
The important part is that this is a flat charge per rental, not a daily charge. Coverage can last for up to 42 consecutive days, or up to 30 consecutive days for Washington State residents. So if you want the peace of mind that comes with primary coverage and tend to rent cars for longer periods, this can be an excellent option.
However, this coverage still has limits. It generally covers damage to or theft of the rental vehicle, but it does not replace liability coverage. It also excludes rentals in some countries, so you should check the current terms before relying on it.
One thing to know from personal experience: once I signed up for this coverage, it appeared to apply to more than just the American Express card I used to enroll. If you only want this coverage on certain cards, check your enrollment settings before your next rental.
Third-Party Insurance
If you don’t have your own auto insurance and you don’t have a credit card that provides rental car coverage, you still may have another option instead of buying coverage from the rental car company.
Several companies sell standalone rental car damage protection or travel insurance policies that include rental car damage coverage. I haven’t personally used this type of service, so I’d do some checking before buying a policy. Some examples include:
These policies can be useful, but they are not all the same. Allianz says its rental car collision damage waiver can cover costs up to $75,000 if a rental car is stolen or damaged in a covered incident. RentalCover says its protection is subject to the terms, conditions and exclusions of the specific plan, which can vary by coverage type and vehicle type.
There may also be a practical difference between buying coverage from the rental car company and using a third-party policy. If you decline the rental company’s LDW/CDW and something happens, the rental car company may still charge you for the damage, and you may then have to file a claim with the third-party insurer for reimbursement.
Before buying, check the policy limits, deductible, excluded countries, excluded vehicle types, claim process and whether loss-of-use or administrative fees are covered.
Travel Websites
If you are from outside the U.S. and book your rental or hired car from a travel website, you can often buy CDW/LDW coverage directly from them when making your reservation.
Rental Car Companies
I include this in the list because it is an option. If you haven’t confirmed coverage through your personal auto insurance, a credit card, a third-party policy or another source, then buying coverage from the rental car company may be your safest choice.
That does not mean it is always the best value. Rental company LDW/CDW is usually the most convenient option because if something happens to the car, the rental company generally agrees not to come after you for the covered damage. But that convenience can come at a high daily price.
Even if you already have coverage, the rental car employee may still try to sell you coverage at the counter. You may hear that your policy is not good enough, or that you could still be responsible for thousands of dollars if something happens to the car, even if it was not your fault. That may be true in some cases, which is why you should know what coverage you have before you arrive.
If you’ve done your homework, stand your ground. Tell them you don’t need to buy the rental company’s coverage because you’re already covered by your auto insurance, credit card, third-party policy or whatever option you’ve chosen. Once they realize you understand your coverage, they’ll usually move on and finish the paperwork.
An easier way to avoid this uncomfortable conversation is to sign up for the frequent renter programs offered by rental car companies. These programs are free, and you can usually save your rental preferences in advance, including whether you want to accept or decline optional coverage, your preferred vehicle type and whether you want to prepay for gasoline.
With many rental companies at larger airports, being a member also allows you to skip the counter and go directly to the lot to pick up your car. If you rent cars even occasionally and haven’t signed up for these programs, it’s worth doing. It can change the whole rental experience.
One Big Thing Credit Cards Usually Don’t Cover
Credit card rental car coverage usually deals with damage to or theft of the rental car itself. It generally does not replace liability coverage, which is the coverage that applies if you injure someone else or damage someone else’s property.
That’s why this is not simply a question of “Do I have rental car coverage?” You need to know what kind of coverage you have.
Final Thoughts
Hopefully, this article gave you a better understanding of the Loss/Collision Damage Waiver and whether you should pay for it when renting a car. Car rental companies will try to sell you additional insurance, and I have reviewed what those are and whether you should buy them in this post.
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