Insurance is a huge profit center for car rental companies. Because people who rent cars can be confused, scared, or rushed into agreeing to the extra charge, the major renters get away with marking up basic coverage far above its worth, often to $15–$30 a day. It doesn't sound like much, but trimming that from your vacation budget would add up fast.
You may not realize it, but it's possible that you can decline Collision Damage Waiver (CDW) insurance coverage every time you rent a car.
Why? Simple: You may already be covered.
Check these things right now—before you travel—to see if you're good to go.
1) Ask your own car insurer. If you own a car, your insurance likely already covers damage when you rent a car, too. Keep a copy or image of your coverage with you.
2) Check your credit card terms and conditions. Many credit cards include rental car coverage as a standard feature as long as you use that card to make the reservation and rental in your own name—no splitting costs with someone else. If you use a debit card, however, don't bother asking—those almost never cover CDW.
As one typical line in a credit card's fine print puts it, "You must decline the optional collision/damage waiver (or similar coverage) offered by the rental company." In fact, opting for the rental company's insurance policy may actually void your credit card coverage for that rental. Which is great news: You have to save that money!
It's also not unusual for your credit card insurance to kick in only after your primary home and auto insurance pays out. If you don't have your own auto insurance, your credit card would then become your primary coverage.
If you use a business credit card to rent cars on vacation, double-check with your card issuer to see whether you'll still be covered.
The rules may contain little twists—you're only covered for the depreciated value of the vehicle, for example, or you can only rent for less than a certain number of days, or some expensive types of cars are out. These little loopholes are common, so it helps to know before you go.
Keep in mind that your credit card's coverage may not cover personal injury, personal liability, or personal property (though it might, so ask about that, too). When a car rental agent hears you decline the CDW coverage, they'll often terrify you with this information, and your mind will race through a list of potential disaster scenarios. But think logically about it—do you really want to pay extra to insure your luggage, which is the only personal property you'll have with you? Yes, you could always buy supplemental insurance from the rental car company that covers these things. Or you could look into number three . . .
3) Ask your homeowner's or renter's insurer if you're covered for personal injury, liability, or property. Your existing coverage—including any travel insurance you might have purchased (click here for a list of suggested companies)—might take care of some of those and you didn't even know it.
Most of the time, the basic CDW coverage offered by the rental car company doesn't include the vehicle's windshield, windows, undercarriage, roof, tires, interior, or side mirrors (basically, the most fragile stuff). It's used mostly to fix the engine or body—dents, scratches, and other damage. But again, your insurance back home may take care of some of those excluded things as well.
So when should you buy CDW coverage?
Don't own a car?
Don't have a credit card that automatically covers CDW, or don't like its restrictions?
Have your own insurance but don't want to risk your personal deductible rising in the case of a claim?
Then by all means—buy that CDW coverage at the rental car company.
But you may be surprised to learn that you don't have to—and that you've unnecessarily spent way too much on rental car insurance in the past.
