When you’re renting a car, the rental company will likely offer you a collision damage waiver (CDW). It’s an optional add-on to your car insurance policy, and it’s important to understand what it covers before you decide whether to buy it.
The availability and terms of a collision damage waiver deductible can vary depending on the rental company and your insurance policy.
This article provides a comprehensive overview of collision damage waivers, including how they work, the alternatives, and the factors to consider when deciding whether or not to purchase one. That way, you’ll be equipped to make an informed decision.
What is a Collision Deductible Waiver?
A collision deductible waiver is an optional add-on to your car insurance policy that covers your collision deductible in certain situations. Basically, it means you don’t have to pay your deductible if you get into an accident with an uninsured driver and it’s not your fault.
Your collision deductible is the amount you have to pay out-of-pocket before your collision insurance covers the rest.
But be aware: Collision deductible waivers aren’t available in every state or from every insurance company. Also, don’t confuse them with the Collision Damage Waivers that rental car companies offer—they’re not the same thing.
How a Collision Deductible Waiver Works
So, how does a collision deductible waiver work in practice? Here’s a breakdown of the eligibility requirements and claim process.
Eligibility Requirements
To qualify for a collision deductible waiver, a few conditions usually have to be met:
- The driver at fault in the accident has to be uninsured or underinsured. This is the most common reason for using a CDW.
- You must not have been at fault in the accident.
- The at-fault driver usually needs to be identified. Hit-and-run accidents may not be covered by a CDW.
- The vehicle’s actual cash value (ACV) must be higher than your deductible amount.
Claim Process
Here’s how the claim process typically unfolds:
- File a claim with your insurance company.
- Provide proof that the other driver was at fault and didn’t have enough insurance to cover the damage.
- If the claim is approved, the CDW will waive your collision deductible, meaning you won’t have to pay that amount out of pocket.
State laws and regulations regarding collision deductible waivers
Whether you’re able to purchase a collision damage waiver, or CDW, depends on the state where you’re renting and the policies of the rental car company.
Some states have regulations around CDWs that set forth specific conditions for offering them. Other states may not allow them at all.
California
California has a framework around CDWs, including specific requirements and limitations.
Massachusetts
Like California, Massachusetts has a framework around CDWs, including specific requirements and limitations.
If you’re renting a car in a state other than California or Massachusetts, check with the rental company to see if a CDW is available and what the terms are.
Collision Deductible Waiver vs. Uninsured Motorist Coverage
It’s important to understand that a collision damage waiver (CDW) and uninsured motorist coverage are not the same.
Uninsured Motorist Bodily Injury (UMBI) coverage helps pay your medical bills and lost wages if an uninsured driver injures you.
Uninsured Motorist Property Damage (UMPD) coverage is different from a CDW, too. UMPD pays to repair your car if an uninsured driver damages it. In some states, UMPD will even cover damage if you’re the victim of a hit-and-run.
The key takeaway? A CDW only waives your collision deductible. Uninsured motorist coverage provides much broader protection.
Alternatives to collision deductible waivers
If you’re not sold on a collision deductible waiver, there are other ways to protect yourself financially in the event of an accident. Here are a few to consider:
Uninsured Motorist Property Damage (UMPD)
UMPD coverage pays for damage to your car if you’re hit by an uninsured driver. Keep in mind that UMPD coverage limits can be fairly low (for example, in California and Utah, the limit is $3,500) and it may not be available in every state.
Vanishing/Diminishing Deductibles
Some insurance companies offer vanishing deductibles, which reward safe driving. With this feature, your deductible decreases over time for every year you go without an accident.
Accident Forgiveness
Accident forgiveness helps prevent your insurance premiums from increasing after an accident where you’re at fault. Like UMPD, accident forgiveness isn’t available in every state or from every insurance company.
Choosing a Lower Deductible
You could also simply choose a lower deductible on your collision coverage. This means you’ll pay higher premiums, but you’ll pay less out of pocket if you have an accident. Weigh the costs and benefits of a lower deductible to see if it makes sense for your situation.
Emergency Savings Fund
It’s always a good idea to have an emergency savings fund to cover unexpected expenses. Experts generally recommend having enough saved to cover three to six months of living expenses. This can provide a financial cushion in case you have to pay a collision deductible or other unexpected cost.
Pros and cons of a collision deductible waiver
Like any insurance option, a collision deductible waiver offers advantages and disadvantages.
Pros of a CDW
- If an uninsured driver hits your car and it’s not your fault, you’re protected from having to pay the collision deductible.
- You’ll have peace of mind, knowing you won’t have to pay out of pocket in certain situations.
Cons of a CDW
- CDWs aren’t available in every state or from every insurer.
- CDWs may have specific requirements you have to meet to be eligible.
- If you rarely encounter uninsured drivers, the cost of the CDW may be more than the benefit you’d receive.
Should you get a collision damage waiver?
Deciding whether to purchase a collision damage waiver depends on your specific circumstances. Here are some things to think about:
- Are there a lot of uninsured drivers where you live?
- How comfortable are you with risk?
- What’s your financial situation?
- How much does the CDW cost compared to how much you might benefit from it?
- Are there other coverage options, like Uninsured Motorist Property Damage coverage, or a lower deductible?
Wrapping Up
When you rent a car, it’s vital to understand what a collision damage waiver (CDW) does and what your other options are for protecting yourself financially if the rental car is damaged.
Before you sign that rental agreement, take a moment to consider your particular needs and circumstances. Do you already have auto insurance that extends to rental cars? Are you comfortable paying out of pocket for potential damage?
Compare the different kinds of coverage available, and don’t be afraid to talk with an insurance professional. They can help you make the right choice for your peace of mind.