The car rental insurance and collision damage waiver (CDW)
When you rent a car, you can be legally responsible for a very high deductible, sometimes equal to the entire value of the car. Fortunately, there’s usually more than one way to limit your financial risk in case of an accident.
The rates for European rentals nearly always include liability coverage, for accident related damage to anyone or anything outside the car. It’s up to you, however, to decide how to cover the risk of damage to or theft of the car itself. You have three main options:
- Buy a “collision damage waiver” (CDW) from the car rental company,
- Use your credit card’s coverage, or
- Get collision insurance as part of a larger travel-insurance policy.
If you’re renting in either Ireland or Italy, you’ll have little option but to buy the company’s CDW. If you need a car for at least for few weeks, you’re most likely off rental, which includes zero deductible collision and theft insurance. Note that theft insurance covers just the loss of the car itself, not anything stolen from inside it.
Car-rental company, CDW
The simplest solution is to buy a CDW add-on from the car-rental company. This coverage technically isn’t insurance, the car rental company waives its right to collect a high deductible from you in the incident the car is damaged. Note that this “waiver” doesn’t actually remove the deductible, but just reduces it. CDW covers most of the car if you’re in an accident, but usually exclude the under carriage, roof, tires, windshield, windows, interior, and side mirrors.
CDW generally costs 30–40% extra. Sometimes the CDW rate itself is a little less when combined with theft/loss insurance as part of an comprehensive rental rate and it’s repeatedly cheaper to pay for this coverage when you book than when you pick up the car.
When purchasing CDW, the deductibles can still be considerable, with most balanced at about $1,000–1,500 (or more, depending on the car type). Many car rental companies also offer a second tier coverage, called “super CDW” or “zero-deductible coverage” to purchase down the deductible to zero or near zero. This is expensive, figure an additional $10–30 per day but, for some travelers, the peace of mind is value it. There’s a huge relieve in knowing you can bring your car back in an unrecognizable shuffle and say, “Sorry, I’m new in this country.”
When comparing rental options online, be cautious that some European rental agencies like Europcar, Sixt, Auto Europe, Rental Cars, Kemwel, Renault EuroDrive quote “basic” rates that include CDW/theft coverage. If these CDW comprehensive rates seem too good to be true, they most likely are: The unwaived deductible is almost certainly high (expect $2,000–3,000), so you’ll have to spend extra to buy the “super CDW” anyway to get the deductible down to a logical level.
The alternatives to pay for the leasing company’s CDW are value considering: credit card coverage or collision coverage through your travel insurance provider.
Car company CDW surcharges can seem like a noise when you consider that most American credit cards already include collision coverage. By paying with the credit card, you get zero deductible collision coverage, likely for free. In other words, if your car is damaged or stolen, your credit card will cover whatever costs you’re legally responsible for. The only major negative aspect is If you do end up in an accident, dealing with credit card coverage can be more of an irritating than what you’d come across with the car company CDW. But if a latent problem seems like a valuable trade off for certain and vital cost savings look into this option.
To make this work, first double check that your credit card does certainly offer this coverage (Visa, MasterCard, and American Express usually do but not Discover). Remember that limits apply and coverage varies between issuers: Get a complete report of the coverage offered by your credit card company. Ask in which countries it is relevant, which parts of the car are expelled, the types of vehicles that are qualified, whether it covers theft/loss, the maximum compensation allowed (if it’s less than the price of the car, the rental company may require you to buy their CDW), and the maximum number of rental days covered (often 30 or 31 days; if your rental period exceed that number, your card won’t cover any of the rental). Have them explain the most horrible case situation to you. It can be smart to ask for a “Letter of Coverage” take a hard copy of it with you to the rental answer in Europe.
Once you’ve confirmed your credit card’s coverage, be sure to refuse the CDW offered by your car rental company. If you accept any coverage offered by the rental agency, you automatically give up your credit card coverage. (In other words, if you buy CDW that comes with a $1,000 deductible, your credit card will not cover that deductible.) This may also be the case if you book and prepay for a leasing that already includes CDW and/or theft coverage don’t sign any rental agreement until you’re sure that by doing so you’re not accidentally accepting the rental company’s coverage.
A credit card’s collision coverage apply even if the damage happens while the car is being driven by someone else, as long as that other driver, and the cardholder, are both listed as drivers on the rental contract. Remember to use that same card not only to set aside the car, but also to pay for it and any other associated fees, whether when booking at home, or when picking up or dropping off the car in Europe switching cards can cancel the coverage.
If you get in an accident, the rental company will charge your credit card for the value of the break up to the deductible amount or, if the vehicle is stolen, the value of the deductible associated with theft. Its then up to you to search for reimbursement for these charges from your credit card company when you get home. You’ll need to present the police report and the car rental company’s accident report.
Be warned that, as far as some rental companies are worried, by declining their CDW offer, you’re technically legally responsible for the full deductible (which can equal the cost of the car). Because of this, the car rental company may put a hold on your credit card for the full value of the car. This is bad news if your credit limit is low mainly if you plan on using that card for other purchases during your trip. Consider bringing two credit cards one for the rental car, the other for everything else. If you don’t have enough credit on your card to cover the car’s value, the rental company may require you to purchase their CDW.
Since most credit card companies don’t offer collision insurance to European cardholders, counter agents especially those unfamiliar to American clients may be disbelieving that declining their CDW is a careful move (all the more reason to have hard copy proof of your credit card coverage on hand). Don’t be amazed if you hear a warning about how credit cards provide only “secondary” coverage that’s unlikely as long as you’ve declined the rental company’s coverage. By clearly understanding the coverage from your credit card company, you can ward off a hard sell on the rental company CDW.
Collision coverage through your travel-insurance provider
If you’re already purchasing a travel insurance policy for your trip, adding collision coverage is an option. Travel Guard, sells affordable renter’s collision insurance as an add on to its other policies. It’s valid everywhere in Europe except the Republic of Ireland, and some Italian car rental companies reject to honor it.
If you do go with an insurer’s complete travel coverage, be sure to add the insurance company’s name to your rental agreement when you pick up the car.
Travel Insurance covers medical everyday expenditure, cancellations, loss or theft, flight delays, emergency evacuations etc. Travel Insurance coverage is personal and dependent on your Insurance provider. Hence, it is important to read the policy wordings carefully before buying your policy.