Renting a car is not a task to be taken lightly. As much as you may want to believe you are the best driver the world has ever seen, you still can’t account for other people’s lack of skill, mechanical failure, or terrible happenstance. To put it bluntly, things happen. And when things do happen in or to a rental car, you’re likely to be stuck with a bill for the damages regardless of whoever is really at fault. However, while purchasing insurance for your rental vehicle, there is a way to purchase insurance for yourself. It is called a collision damage waiver.
A collision damage waiver, also sometimes referred to as a loss damage waiver, is a legal piece of paper that prevents a rental car company from charging you if your rental car is stolen or accidentally damaged. Why would a car rental agency agree to such terms? Because it another stream of revenue, that’s why.
Why do Rental Car Companies do it?
It is a simple matter of risk versus reward. The car rental agency takes on a greater amount of risk by saying it will pay for any damages that accidentally occur to the vehicle. However, they stand to gain a greater reward, in this case more money, when you bring the car back incident free because you paid for a waiver you ended up not really needing. In the end, the car rental company makes more money because the amount they bring in from waiver purchases is greater than the cost of repairs needed for vehicles that were damaged while the renter was under the protection of the waiver.
The collision damage waiver addresses both liability and damage. While the waiver’s coverage differs from company to company, the main premise stays roughly the same - which is as follows:
• If the rental car is used to damage property or injure someone in any way, the renter is responsible for paying for the damage or medical bills as seen fit by said governing body. Basically, the rental car company is not, and cannot, be held liable. This is basic liability insurance found all across the globe and really makes perfect sense. • If a customer pays for a collision damage waiver, then any accidental damage the vehicle incurs will be paid for by the rental company (subject to excesses or deductibles). Accidental damage includes theft, weather damage, vandalism, or damage resulting from an accident for which the renter was not at fault. Basically, the renter will not be held liable for issues involving the vehicle that are outside his or her control (again, subject to excesses or deductibles).
Collision damage waivers are also generally accompanied with liability insurance and towing coverage. If no one tells you that towing coverage is involved, ask and make sure that it is. Not having to pay for damages that are outside of your control is great, not having to pay for the cost of getting the damaged vehicle back to the rental company is even better.
Is it Really Insurance?
Also, please be aware that while a collision damage waiver may cover many issues usually brought up by insurance, it does not count as insurance. If you don’t have insurance that covers rental car usage, then you’ll have to purchase regular insurance alongside the collision damage waiver. The reason the waiver can’t take the place of insurance is because the waiver is created by the rental car company. Rental agencies do not server as licensed insurers, and therefore cannot provided viable insurance. Any insurance the rental agency sells you for your rental vehicle, will be covered by a licensed third-party insurer.
Are There Other Options?
Lastly, you may want to keep in mind that most credit cards offer some type of insurance for stolen and damaged rental vehicles. Before you purchase a collision damage waiver from a rental car company, check to see what your credit card covers. There is no sense in purchasing coverage you already have. However, most credit cards that offer this coverage only do so at the expense of a monthly fee of some kind. If you aren’t paying regularly for your card, then it is doubtful you have collision insurance. You can still always purchase it though.
Also, many car rental companies offer you the ability to buy via a third party rental car (or travel company) insurance. This may be a good option. Check for availability however. It's not for everyone at every location.
Should you have collision damage insurance? Probably. Do you have to purchase it from a rental car company? Not necessarily. Take a look at your options and make the most affordable decision you can.