If you’re renting a car, you might be wondering whether your auto insurance policy provides enough protection. While many policies do extend some coverage to rental vehicles, there are important limitations and potential gaps. That's why it’s often a smart idea to purchase the Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) offered by the rental car company.
Here’s why:
1. Gaps in Your Auto Insurance
Your auto policy may include liability, collision, and comprehensive coverage that applies to rental vehicles—but only if those coverages are already part of your plan. Even then, there are exclusions. For example, your policy likely won’t cover:
• Loss of rental income while the vehicle is being repaired
• Administrative fees charged by the rental company
• Diminished value of the rental vehicle after an accident
2. Loss of Rental Income Could Cost You
If the rental car is damaged, the company may charge you for the income they lose while the vehicle is out of service. This is typically not covered by your auto policy, but the CDW usually includes it.
3. Total Loss Scenarios Can Be Costly
In the event of a total loss, your insurer pays the actual cash value (ACV) of the car—not the replacement cost. That means you could be responsible for the difference. CDW coverage takes care of that risk.
4. No Coverage Abroad
U.S. auto insurance policies only extend coverage to rentals within the United States, its territories, including Puerto Rico, and Canada. If you’re traveling internationally, your policy won’t apply—and purchasing the CDW is essential.
5. Off-Road Vehicle Rentals May Be Excluded
Renting a Jeep, Bronco, or 4x4 for an off-road adventure? Auto insurance policies only cover driving on paved roads or private property. Check with rental car company to see if the CDW will protect your rental vehicle in off-road driving situations.
6. Luxury Vehicles Often Aren’t Covered
Standard policies may exclude high-end vehicles like Ferraris, Lamborghinis, or Rolls-Royces. Their value can exceed your policy limits, so the rental company’s coverage is a safer bet.
7. Avoid Paying Your Deductible
If you rely on your insurance, you’ll still be responsible for your deductible in the event of a claim. The CDW typically eliminates this out-of-pocket expense.
8. Simpler Claims Process
With the CDW, you deal directly with the rental company if there’s an accident. This can save you time, hassle, and potentially help you avoid filing a claim on your insurance, which could lead to higher premiums.
9. Credit Card Coverage? Read the Fine Print
Some credit cards offer rental car insurance if you use them to pay and decline the rental company’s coverage. However, these benefits come with strict terms and conditions—so be sure to confirm your card’s policy in advance.
Bottom Line:
While your auto insurance may provide some coverage for rental cars, it doesn’t cover everything. For peace of mind, fewer hassles, and better financial protection, the Collision Damage Waiver from the rental car company is often well worth the cost—especially when renting internationally or driving a luxury vehicle.
