WEDNESDAY, OCTOBER 19, 2016
You are finally getting away on your dream vacation. The tickets are purchased. The bathing suit is packed. You call to set up the rental car and the agent attempts to talk you into buying the Collision Damage Waiver or Loss Damage Waiver. One more decision before you head off to paradise...
What is a Collision Damage Waiver/Loss Damage Waiver (CDW/LDW)?
The Collision Damage Waiver or Loss Damage Waiver is an optional service made available by rental car companies to cover you in case of an accident to the vehicle you have rented. When purchased the CDW/LDW waives the right of the rental car company from collecting damages from you after an accident (when contract conditions are met). The typical cost of the damage waiver can range from $10-$30/day.
But do I need to purchase this coverage? Will my auto insurance cover me?
If you are renting a passenger vehicle as a temporary replacement, the liability and physical damage coverage (if carried) will extend from your policy to the rented vehicle. However, an accident in the rental car will still be subject to your policy deductible and could affect your future insurance rates. Rental car companies may also charge you loss of use while the vehicle is being fixed and unavailable for rental by the company. Most auto insurance policies will not cover this loss of use.
What about my Credit Card? Can I get coverage there?
Most major credit cards now offer some rental or loss of use coverage. Check with your credit card to find out exactly what coverage is offered.
Reasons to purchase the Rental Car Waiver:
1. Loss Valuation
A standard auto policy, whether it be the Massachusetts Auto Policy (MAP) or the Personal Auto Policy (PAP) which is used in most other states, covers the lesser of "actual cash value" of the vehicle or the amount necessary to repair or replace the damaged property. The agreement from the rental company may contractually require you to reimburse the "full value" of the damaged vehicle. The auto policy will not cover "betterment" or "diminution of value."
2. Loss Payment
In the event of a loss to the rental vehicle, the rental car company may require immediate reimbursement and charge the credit card they have on file for you. This may lead to a significant charge and/or a maxed out credit card while you wait for the claim to be settled.
3. Limited Coverage
Your auto policy will likely respond if you carry collision and comprehensive coverage but if you do not carry these coverage the policy will not respond to the rental car damage. The auto policy also will not cover the loss of rental income to the rental car company while the vehicle is not available to be rented. Other fees that may be incurred outside of your insurance coverage include towing, appraisal, claims adjustment, storage, etc.
4. Coverage Territory
The MAP and PAP provide coverage for use of covered vehicles within the U.S., its territories and possessions, Puerto Rico, and Canada. Renting a vehicle outside of this coverage territory would not be covered.
5. Additional/Future Costs
Your auto policy includes deductibles for collision and comprehensive coverage, typically between $300-$1000. In addition to paying this deductible, payment for damage to a rental car may result in a significant premium increase as a result of surcharges and/or loss of credits.
THE TAKEAWAY: We advise that consumers, in general, purchase the Collision/Loss Damage Waiver, at least when renting a vehicle for a short period of time. Although the coverage can be expensive, the additional coverage can save you a lot of time and money in the event of a loss in a rental vehicle.