[Editor's Note: This is a guest post from Douglas Segan, MD, JD. We have no financial relationship.]
The Issue Collision Damage Waiver
You are at the desk of the car rental office. The odds are that you are a little stressed and in a hurry. The agent at the desk puts some paperwork in front of you and asks you if you want the collision damage waiver (CDW.) Do you really understand the implications of buying or declining this option?
In October 2011 I was driving to my rotation in Ontonagon in a lovely Jeep SUV from Enterprise. In a forested area of the Upper Peninsula of Michigan I heard a nausea inducing loud crashing sound. I did not see it coming, but based on the residual debris it appeared that a bird collided with my vehicle.
The car worked fine but there was a subtle dent to the hood. I naively estimated that the damage would be about one hundred dollars and foolishly believed that the credit card company (American Express) would quickly and seamlessly pay for any damage to the rental vehicle. I was so wrong.
Enterprise sent me a demand letter for about $611 (about $342 for the cost of repairing the damage, $50 for an administrative fee and about $220 for loss of use of the rental car while it was being repaired). Luckily for me they did not demand the loss in the resale value of the vehicle ( which they could claim based on the fact that it now has a record of being damaged and repaired).
What is Collision Damage Waiver?
The CDW, also know as the damage waiver and loss damage waiver, is an optional damage coverage to consider when renting a vehicle. It is technically not a type of insurance but it is a waiver between the renter and the car rental company that the company will waive their right to charge the renter for damages to the vehicle. CDW does not address all the other liability issues that may arise when one is driving a car (such as injuries and damage to other vehicles and property).
Things to do Before your next car rental
It is challenging to give general suggestions about the pros and cons of buying CDW because every credit card company, car rental company and auto insurance policy has a unique and confusing amount of fine print explaining what they will and will not cover, the amount of the deductible and what rules you have to comply with when you make a claim.
Please do the following before your next car rental:
- Talk with your auto insurance agent about your coverage when you rent a car for business or pleasure. For example, my auto policy will cover the cost of repairs to the rental car (after the deductible,) but they will not pay the administration fee or the loss of use fee.
- Talk with your credit card company. Ask them what they will cover if there is damage to the rental car. In my situation, American Express won’t cover the loss of use fee since Enterprise won’t provide a fleet record showing that all other cars at my location were being rented during the repair period.
- Talk with your rental car company to find out the cost of CDW and the parameters of the coverage. For example, Enterprise in Lansing, Michigan charges $14 per day for CDW.
Conclusion – Should You Get Collision Damage Waiver?
The decision whether to buy or decline CDW is much more complex than I ever imagined. Learn about your potential types of financial exposure if there is damage to your rental vehicle (the cost of repair, the administrative fee, the loss of use charges and the reduction in the resale value because the vehicle now has a damage history.) Talk with your auto insurance agent, your credit card company and your rental car company to help decide if the cost of CDW is worth the benefits. One factor that enters the decision for me is the large number of deer in addition to elk and moose in northern Michigan and the severe and hazardous winter weather driving conditions that may occur.
[Editor's Note: I actually have some experience with this topic. I have had two damaged rental cars in the past, one clearly not my fault, the other probably was, but USAA chose to call it “no-fault.” Between USAA and the credit card company, I wasn't out any money either time. But for the amount of expense we're talking about here, it seems to me that the amount not covered by your insurance company and credit card is probably within a range most physicians can self-insure. I suspect that like most rental car add-ons, this one is usually priced far above the actual value.]
What do you think? What does YOUR insurance company cover? Do you buy the CDW or just self-insure this cost? Comment below!
I use usaa for both my cc and auto insurance and feel comfortable with just using that.
The costs for these riders are too high in my view.
I have been lucky to not have had any damage to rental cars so far. I have always declined the cdw. I also try to get the cheapest car because if worst comes to worst, I can pay for the car myself.
i think this goes back to insuring against catastrophe and things you can’t afford. when you are paying $20-40/day for a rental car that $14/day for the cdw looks like a terrible investment. i see it no differently than extended warranties, trip insurance, etc. all ways to part you with you money, while offering very little value.
i had a rental car accident while in hawaii. no cdw. my auto insurance covered everything. didn’t pay a cent.
I would agree. I believe you should only insure against those things you can’t afford to cover yourself. For most docs, buying CDW is comparable to an experienced swimmer wearing a life jacket in a swimming pool.
WhoWhat was your auto insurance co.???
What insurance did you have at that moment?
What insurance company?
I’ve never bought any of these riders, extra insurance programs, or even special features like adding a GPS. I even brought my own child car seat along on my vacation in December because I don’t trust the rental car child seat and for what it would have cost to rent one for two weeks I could have just bought a new one.
I’d agree that a lot of these programs are just easy profit. Right up there with paying two or three times the market rate for gasoline just to be able to drop the car off with an empty tank.
This is something to really think about as I have been declining CDW until now as my credit card includes some kind of protection in itself and also my existing auto insurance supposedly includes coverage for rental vehicles. But had never thought about loss of use or administrative fees.
These kind of extra add-ons do seem like they are just trying to rip us off more money..Especially GPS / Child seats etc. One week of rental cost for GPS would definitely buy you a brand new GPS!
With the site redesign, on mobile (chrome/android) some of the ads mess with the text alignment, making the text column really narrow with normal size text.
Thanks for noticing. You shouldn’t notice it going forward, and I’m gradually changing the older articles. Other than that, how do you like the new mobile design?
Definitely like the new design. Much easier to manage with a small screen. When ads are fixed I will probably use it more often than the non-mobile version. Thanks for the great site.
Let me know if ads give you problems going forward. They should still be there, but the text should be just above and below. That’s how it looks on my iphone 5s.
I always decline the waivers when renting in the US. However, one should carefully read his or her credit card agreement re. rental cars in foreign countries. I have purchased the waivers in Ireland and Italy, as those countries were specifically excluded from coverage on my credit card. Additionally, certain types of cars (off-road and convertibles) may be excluded from coverage.
I think it pretty much just comes down to insurance companies are trying to screw you. Just self-insure as much as possible and decline any and all non-mandatory coverage as long as you can afford it. If you can’t afford it, rent a cheaper car or try to avoid it in general.
I’ve always declined the coverage – after checking with my auto insurance, as well as credit card coverage. I’ll send this article to my agent, ask them for an opinion.
An interesting tangent, already alluded to by another poster – insurance coverage out of country. I’m thinking specifically Mexico; after reading about the amount of liability, even with insurance (and you will need a new policy, in-country – your USA policy (AFAIK) won’t cover you), no way I’d ever drive there. As I understand it – you’re considered guilty until proven innocent, and may find yourself incarcerated until you pay all damages – cash. Hopefully someone can disabuse me of this perception.
I pay $25 per rental (regardless of car type, duration of rental) to AMEX for primary coverage (including damage, theft, towing/storage, loss-of-use) up to $100K. It includes also has the standard secondary coverage for your medical/injury (15k max) and personal property coverage (5k per person, 10k aggregate max). Motorcycles, campers, limo’s or true off-road vehicles are excluded (but not just a Jeep Wrangler or similar), and coverage is provided for most countries (Excluded are Australia, Ireland, Israel, Italy, Jamaica and New Zealand as with all AMEX car rental coverage). Loss-of-use does require submission of the fleet log by the rental company as noted in the article above, which apparently may not happen…
It still of course does not provide coverage for damage to other vehicles, injury/medical for another person, uninsured motorists, other liabilities.
Most of the above comes with AMEX’s standard coverages, but the $25 gets primary coverage for damage/theft and higher maximum’s (100K vs 50K).
I guess I did this because it’s a flat reasonable fee for the whole duration, but haven’t had an incident to see many holes/hassles there are in coverage, whether primary or not…
I always turn down the CDW and use the coverage with AMEX. I’ve unfortunately had to use it twice, but AMEX came through very well. They do make you pay whatever deductible you had with your own auto insurance policy though.
I use a corporate discount code from my university almuni association that includes free loss-damage waiver, among other benefits.
If you use your regular car insurance to cover damage to a rental don’t your rates go up and follow you til they’ve recouped their cost?
I have USAA, decline the CDW and luckily haven’t had to use my insurance but its another side of the equation that needs yo be taken into consideration.
I suppose I’m in the minority here, but purchasing CDW totally saved my behind. I’m over 30 years of age and have rented a car several times without any incident. I took a trip to Puerto Rico last year and for some unknown reason, the car rental company refused to allow me to rent the car without CDW – It was $250. Within one hour of leaving the rental company, I accidentally Tboned another car, with my car needing to be towed off the road. The company sent out a new car within an hour and the rest of my trip was actually enjoyed. A month later at home I get a letter from the rental company. They sent me a copy of the invoice ( for records sake ) it cost them to fix the vehicle – it was over $3500! Granted probably a little inflated but still expensive. Now in the future, I will definitely consider getting CDW….
I don’t know if it saved your “behind.” It looks like your $250 investment made you $3500 (and that’s assuming neither your insurance company or your credit card would have covered any of that expense.) Certainly a typical physician emergency fund should be able to cover an expense like that without much pain. Doesn’t sound like you really had much of a choice though, since they wouldn’t rent you the car without it. That’s just part of the cost of the rental. Glad it worked out great though!
I have rented in Europe numerous times for vacation use. The first few times I declined the CDW, without incident. Later I started thinking about the usual hurried rental return routine just before rushing off for transatlantic flight checkin. What if there were to be a dinged up fender, etc and I would be trying to explain to a local native with very limited English skills that I have insurance back home that I think will cover……I believe they would want cash on the spot and tell me to work it out back in the States on my own. So, now I take the CDW and know I could just walk away from the problem.
Hard to quantify the hassle factor, but it is certainly worth something to eliminate that, especially while on vacation.
“Luckily for me they did not demand the loss in the resale value of the vehicle ( which they could claim based on the fact that it now has a record of being damaged and repaired).”
This seems wrong. You are paying to repair the vehicle. They aren’t turning it in to insurance. Therefore, it’s doubtful there will be any record of the accident. Thus, resale value won’t suffer.
I wasted 6 months of my life working as a slave for Enterprise. They are a vile company urinating on the passion and dreams of new college grads. As the largest employer of new college grads, the average stay was 6 months. Pay was terrible – they all sold us the hollywood dream of rising to the top of the company / region.
Off the soapbox. CDW is a waste. It is where a great portion of their profit comes from. If a person can’t average selling this junk coverage 40% of the time (2 of the previous 3 months), they are not promotable. It’s a junk product, loaded with loopholes and exclusions.
Loss of use generally can’t be legally enforced. In fact, whenever someone pushed back on this, ERAC caved in and let that part go.
1. If the car is stolen, sorry – not covered.
2. Say you live in St. Louis, where I worked. On the contract, you had to list all the states the car would be in. If you went across the river into Illinois and had a fender bender – not covered, as you didn’t declare it at the time of rental.
3. You rent in your name. On a long trip, your spouse puts in some miles to share the burden. She has an accident. If she’s not on the contract, you guessed it, it’s not covered.
Many credit cards will offer this protection for free. You have to book and pay for 100% of the bill with the card.. check the fine print and details.
There’s a reason they give you such a hard sell on it.
Enterprise trained us to brag about how competitive their prices are. In fact, their prices are terrible. Their niche is the insurance replacement market. When anyone shopped us on price, they never called back for a reservation.
If you must go with Enterprise, book online. When getting prices directly from your local branch, they increase them substantially up from the prices on the web site.
Damage waiver is snake oil. I saw it all behind the scenes. Enterprise is awful. I’ll stop the rant here.
Thanks for the insight! Helpful to see from the other side of the counter.
Sure! I’m always glad to reveal the truth about things.
One last detail, which the Author may not be aware of:
Loss of use – this fee is a junk fee. It generally very tough to enforce. Any time anyone ever pushed back against this charge coming from Enterprise, they simply gave up their pursuit of the loss of use fee. There’s a lot of filth in the industry, this article only scratches the surface of it….a big reason why I didn’t stick around too long.
Or you were fired and now you just like to diss them online.
I also worked for enterprise too, and half of this info is false. I don’t love the company but don’t spread false rumors… Spouses are automatically covered in the rental and include CDW, just as the PAI includes to spouses and anybody inside the vehicle. Also, as far as the state lines go, you should be asked if you are going out of state, so just say that you are.
Credit cards and auto insurance can cover rentals but they more than often come with a deductible, so you have to weigh the risks of paying out a certain amount of $$$$$$$$$$$$, etc.
This does not even take into account the vast array of customers who come in without a major credit card and their insurance does not transfer to rentals…
I don’t love enterprise (although it helped me land my current gig) but [ad hominem attack deleted.]
I rented a full size in a college town. It was snowing and all they had was a Ram 1500. If anyone hasn’t driven a later model pickup with crew cab, these things are huge. Anyway, it was snowing and seemed like a good idea. I dinged it up parking — it would have been fine in a suburb, but in a small place with no parking– it was absurd. The ding was a nice, healthy dent in the fender.
I have a $500 deductible on my auto insurance. I also have amex, but they don’t insure rental trucks in the small print.
Naturally, the cost was $800. Since any trip to a body shop starts @ $500, I wasn’t surprised. So, I could either pay the $800 or submit a claim and pay $500. Since I have a household of female drivers, I prefer to only submit claims that are significant.
So …. last time I flat out refuse the waiver. I have had very good luck before this with Enterprise. I will negotiate for an upgrade or lower price or something + the insurance. At least an upgrade. If it was a temporary car when my car is in the shop — I wouldn’t bother. But in difficult city driving in an unfamiliar area, so what? I could have bought the waiver for 60 days of rentals for what that little ding cost me.
Is it a good deal objectively? No. On the other hand, who wants any hassle when vacationing or traveling? The $500 deductible on collision on my own policy has saved a lot over the years.
I never buy service contracts except on laptops and dishwashers. For someone with a physician’s income — it all rounds to zero however one decides.
Also … Enterprise didn’t even try to charge me for loss of use of the vehicle. I basically trashed the fender … they are made of paper anyway. The 4 wheel drive was very helpful.
I can see how it isn’t a great job for a college graduate, since it is a sales/customer service entry level job.
I have never used them at an airport … only the local places. One time, all they had was a Kia minivan. My car was going to be in the shop for a week since someone rear ended me. They said to stop by the next day and they would do better. They gave me a loaded Tahoe — about 20k miles on it. It was fun to drive around. I think Allstate payed their standard rate on this. The ‘list’ price on a Tahoe is $100/day.
My insurance deductible is $250 and covers rentals. Now, that is fine for when I rent a vehicle on extended leave, say over one week. However, for when I have to take a vehicle out to the back country for one or two days, I don’t necessarily want to rely on my insurance alone. Why would I want my rates to go up filing a claim over a tree that fell on my car, for instance, which happened to a friend of mine actually? Regardless of whether it was an act of nature or my fault, my rates will go up because I am filing a claim – Insurance companies don’t like claims…lol…that is common sense because they have to pay out money. Here is my best advice. First, understand that rental car companies, like Enterprise for example, don’t actually have set daily or weekly rates for their vehicles and that their sales associates earn promotion by selling insurance and add-ons and their managers earn commission. So, if you want to rent a Jeep that is $85 per day, tell (don’t ask. TELL!) the sales associate that you would like the Jeep for $45/day and that would would like the CDW and maybe the RAP (Roadside Assistance for an extra $5/day even if you have AAA). All total, you save $20/day since you would have never gotten the Jeep for less than $85 without the insurance/add-ons.
Interesting. I might try that.
This will work the majority of the time!!!!
Do you ask when you are reserving the car in advance? Or when you go up to the counter at the time you are renting the vehicle?
The way I see it is like this, I have very good homeowners insurance on my house with a low deductible that I pay a lot of money for. It covers burglary and fire loss. But I still pay every month for my monitor burglary and fire alarm. If you are going to be in the rental for more than a week I would say let your policy cover it (if you know it will) but for an extra $100 for a week I will tale the CDW every time.
Full disclosure, I use to work for Hertz and now work for Enterprise. Hertz employees do get paid commission for selling but Enterprise employees do not.
Rob is correct, and when I worked for ERAC, I basically told my customers the same thing.
This is a dumb article. You must calculate your probability of a collision times the expected value of the administrative/loss of use fees vs the cost of the collision insurance.
For example, if it cost you $400 because you waived the insurance, but it would have cost you 100 to purchase, then yes, in the event of a collision, you would benefit. But if the likelihood of a collision on any given rental is only 5%, then you are much better off never purchasing the insurance and taking the 400 hit once every twenty rentals.
You SHOULD buy the CDW if it is snowing/icy when you rent, regardless of what your credit card covers. The CDW is very expensive insurance, as people have noted above. However, unlike most conventional insurance, they let you choose to purchase the insurance only when the risk of a loss is highest.
This is especially true if it is a business rental, and you will be reimbursed for the cost anyway.
I frequently rent full-size trucks for work from Enterprise in the SF Bay area. I ALWAYS pony up for the CDW — it’s almost silly not to, imho. Even the smallest nick or dent will set you back $500 or more, and they are very easy to come by in this locale. Clearly, if your credit card company or car insurance policy covers damage, there’s no point.
I do not own a vehicle, therefore I do not have any auto insurance. So in my case I get the CDW everytime I rent.
I always get the CDW insurance due to the fact I do not own a car and have no auto insurance. I live in Hawaii. I rent a car when I have under 25 relatives visit. Recently my rental was broken into by someone breaking the passenger front window. Police were called immediately. The car rental customer service was awesome. I returned the car and was given a new car immediately. No questions asked, just had to fill out an additional accident form beside police report. I didn’t have to pay a thing.