By Dr. Douglas Segan, JD, Guest Writer
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?
The Issue Collision Damage Waiver
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 the Collision Damage Waiver?
The Collison Damage Waiver (CDW), also known 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.
[FOUNDER'S NOTE BY DR. JIM DAHLE: 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?
[EDITOR'S NOTE: Dr. Doug Segan is a board-certified EM physician and attorney. He currently teaches at Zucker Medical School at Hofstra University in Long Island, NY. This article was submitted and approved according to our Guest Post Policy. We have no financial relationship.]
Damage waiver is a joke. It’s a wager the rental companies make, similar, but with significantly higher returns than an insurance company. It’s their number one profit center. I used to work for enterprise. It’s a racket, which is why they train their employees to get at least 3 no s before giving up on selling it! But somebody needs to buy dw and extended warranties I guess.
What happens if you denied a CDW and your car gets stolen, and your insurance company does not want to pay?
Either your insurance or you would pay.
This article is now quite old so things may have changed, but after reading it, I called Amex and asked about the Primary/Premium Rental Car Insurance service they provide. Their terms and conditions already mention that fees charged by the rental company (unless falling in one of the specifically excluded categories) that are related to the collision are covered. They confirmed to me over the phone that they would cover the “administrative fee”.
For the loss of use, they also do cover it but indeed they require the agency to prove that they are even in their right of asking for it. If the rental company cannot prove it, it would make sense to contest paying it at all since clearly they can’t prove they actually need to recover this cost and it would likely not hold in any sort of courts.
I also asked Citi the same questions (Citi’s policy is much more vague but has very few exclusions) and they also confirmed the same thing about administrative fee being covered and loss of use being covered (they didn’t specify what kind of documentation they’d require to approve the loss of use though, while Amex documents it clearly).