Cheaper Car Rentals? Check Your Coverage

Most people who rent cars spend a little extra to get collision insurance. And it seems like a smart move — after all, who knows what might happen out there on the open road?

A “Collision Damage Waiver,” or CDW, is part of most rental agreements. A CDW means that the rental agency won’t charge you for damage to the car because of an accident. In return, you pay an additional daily fee to rent the car.

Do You Really Need A CDW?

With the cost of driving always going up, many renters are wondering if they really need to pay extra for CDW. It turns out, they may not.

There are two reasons you might not need CDW:

• You’re protected by your current auto policy. If you have collision insurance for your car, chances are the protection extends to a rental car. As long as you are driving the rental in the United States, are authorized by the rental agency to drive the car, and are driving it on a “temporary” basis, you probably don’t need to pay extra for a CDW. But as always, check with your insurance company before jumping to conclusions.

• You’re protected by your credit card company. If you pay for the rental with a major credit card, there’s a good chance your card company will insure the vehicle against damage. Most companies limit the coverage to a total of 15 days. And most will only start the coverage if you decline the CDW. Again, you’ll want to check with your credit card company before deciding what to do.

When Should You Have A CDW?

There are times when paying extra for coverage makes good sense. You should pay for a CDW when:

• You’re driving in a foreign country. Your insurance probably doesn’t cover any damage that happens outside the United States. So if your next trip to Texas includes a detour through Mexico, you’ll want the CDW.

• The rental agency charges a “loss of use” fee. Though not all do this, some companies charge a fee to make up for the money they lose while a damaged car is being repaired. This fee is charged on top of the cost of the collision damages. So even though your insurance might pay for new tires and some body work, the rental agency still hits you up with additional charges. Before you rent, ask the rental company if they charge “loss of use” fees. If so, ask if their CDW covers them. 

Before you decide to decline the CDW on your next car rental, do your homework. Find out how exactly much coverage your current policy gives you. If you rent often, you may want to compare policies from other companies and see which provides the best coverage.

“We don’t want people driving rental cars without insurance coverage,” said Jon Osterberg, spokesperson for PEMCO Insurance. “At the same time, it’s wasteful to buy coverage you might not need. Consumers can save money and relax on vacation by verifying their existing coverage before they leave.”