Does your regular auto insurance cover collision damage to a rented car? If it does, you probably don't need to buy the collision damage waiver, or CDW, sold by car-rental companies if you're renting in the United States or Canada.
The editors of Consumer Reports Travel Letter say that for some car renters, CDW may be a needless duplication of coverage that adds $5 to $11 a day to the cost of renting a car. In the most competitive car-rental markets, a week's CDW coverage can actually exceed the lowest advertised weekly rental rate.
Don't look for discounts on CDW. While car-rental rates are often reduced through special promotions, the daily CDW charge is not.
The per-day cost of a weekly or weekend rental is usually well below the ordinary weekday rate, but the daily CDW charge will remain the same regardless of when or how long you rent. And you'll pay for a full day even if you rent the car for only an hour.
What if your auto insurance policy does not cover collision damage to a rented car -- and you don't buy CDW? You may be liable for up to $30,000 in repair costs.
Only a few years ago, the normal practice in the car-rental industry was to limit renters' liability to deductibles of anywhere from $1,000 to $3,000. But today, full-value liability is the norm. (Full value means you are liable for all damage up to the full current cash value of the car.)
CDW should eliminate any liability for collision damage -- but read the fine print carefully. In most contracts, coverage is canceled if you violate any part of the basic rental agreement -- say, an unauthorized person drives the car, it's driven off a paved road or used to tow another vehicle, it's raced, or the driver is drowsy or intoxicated.
If you plan to rely on your own insurance for collision coverage, take your insurance documentation with you, and be sure you know how to reach your claims agent.
If you don't buy CDW, if you buy it but violate the provisions of the agreement, or if your insurance company doesn't have a local claims representative, the car-rental company may place an immediate charge on your credit card -- that's why you're required to sign a blank credit-card chit at the time of rental.
The charge could be up to the full value of the car, in case of a severe accident, or up to the limit on your credit-card account, leaving you unable to make any additional charges on your credit card until you pay the bill.
If you carry more than one credit card, use the one with the lowest credit limit to rent a car. That will minimize the amount of credit a car-rental company can tie up if you have an accident.
Overall, the editors think CDW is a very poor buy considering the benefit it provides. If you rent a car 20 days a year at an average of $8.50 a day, the $170 for CDW would probably buy much more protection if you spent it on increasing the coverage of your year-round auto policy.
If you don't own a car or don't carry collision insurance on any car you own, CDW is your only protection against collision claims that could go as high as $30,000. Under those circumstances, CDW is probably cheaper than taking out a short-term auto policy.
If you do buy CDW, read and comply with the rental contract's CDW provisions, especially those that void the CDW coverage. And make sure everyone in your party who plans to drive the car signs the contract, even when there is an extra charge for additional drivers.