In all of car insurance, one subject which causes a great deal of confusion lies in the contemplation over purchasing Collision Damage Waiver for your rental car. When renting a car, you will be offered the option of purchasing the Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW). Here are the top 10 reasons why consumers, in general, should purchase CDW/LDW:
- Loss Settlement – Oftentimes there is disagreement over the value of the car or the charges for labor and materials of the repair. Your personal car insurance company has the right to inspect and appraise the damages before its repair or disposal. This is a contractual obligation over you, not the rental car agency who may choose to replace or repair the vehicle immediately. Such an action potentially results in a lack of coverage in your personal car insurance because of your failure to comply with this contractual obligation. Purchasing the CDW can allow the renter peace of mind without having to worry about adjusting an auto claim.
- Loss Valuation – A personal car insurance policy often covers the lesser of the actual cash value of the car or the amount necessary to repair or replace the damages. However, the rental agency may contractually obligate you to reimburse them for the full value. It should also be noted, that your personal car insurance may not pay for any betterment, or any diminution of the vehicle. A betterment is considered an increase value of new parts when replacing old ones. A diminution is when the market value of the vehicle after repairs is less than that before the accident.
- Loss Damage Waivers (LDW) – Rental agencies oftentimes hold the renter responsible for any loss in value beyond normal wear and tear, regardless of fault and regardless of the cause. In order for your personal auto insurance policy to respond, you must insure at least one vehicle for both collision and comprehensive coverage, otherwise your personal car insurance policy will not respond to a claim from the rental car agency for damages and loss of use.
- Loss Payment – The rental agency may require immediate reimbursement for damages. It is customary practice for the rental company to charge your credit card, which they have on file.
- Other Insurance – Your personal car insurance policy may state that it is excess over other insurance, such as any coverage provided by the owner of the car or any other physical damage insurance or any other source applicable, for example travel policies and credit card coverages. There is much room for potential controversy over who pays for what which can easily result in litigation.
- Indirect Losses – You will most likely be responsible for the rental agency’s loss of income on the damaged vehicle.
- Administrative Expenses – Your rental car agency may charge you for various administrative or loss-related expenses, for example, towing, storage, claims adjustment, etc, which may not be covered by your personal car insurance policy.
- Excluded Uses and Drivers – Your personal car insurance policy may have limitations which are not otherwise excluded by the rental agency CDW or LDW. Also adding a designated driver under the rental agreement may afford protection to additional operators.
- Excluded Vehicles and Geographic Areas – Use of covered vehicles may be limited to passenger vehicles and not motorcycles or mopeds for example. Your personal car insurance policy may further limit use of covered vehicles to certain geographic areas, for example the United States, Puerto Rico or Canada.
- Additional and/or Future Costs – A deductible will most certainly be charged under your personal car insurance policy. Additionally, payment for damages to a rental car could result in an insurance premium increase through surcharges or loss of credits.
The Collision Damage Waiver for your rental car can provide you with peace of mind and save you from a great deal of inconvenience, lost time and expense.
For this matter and all insurance related questions and decisions, keep in mind that your policy is unique and must be specifically reviewed. Please always review your policy and consult with your insurance representative.