By Rick Steves
When you rent a car, you are liable for a very high deductible, sometimes equal to the entire value of the car. There are various ways you can limit your financial risk in case of an accident. Those needing a car for at least three weeks should look into leasing, which is tax-free and includes zero-deductible collision and theft insurance.
Car-Rental Company CDW
The simplest solution is to buy a collision damage waiver (CDW) supplement from the car-rental company. This technically isn't insurance; rather, it's a waiver: The car-rental company waives its right to collect a high deductible from you in the event the car is damaged. CDW covers everything except the undercarriage, roof, tires, and windshield. While each company has its own variation of CDW, it generally costs $15–35 a day (figure roughly 30 percent extra) and reduces the deductible, but does not eliminate it. Many rental companies have inclusive plans that come with both theft/loss insurance and a more reasonable CDW — ask. In general, it's cheaper to pay for this kind of coverage when you book than when you pick up the car.
Note that it can be even cheaper to buy all your travel insurance — including collision coverage — from a travel insurance company (rather than buying some insurance from a car-rental company and other portions from a travel insurance company). If you do, be sure to add the travel insurance company's name to your rental agreement when you pick up the car.
When purchasing CDW, the reduced deductibles can be substantial, with most hovering at about $1,000–1,500 (or more, depending on the car type). So, when you pick up the car, the counter agent might try to sell you a second tier of coverage (called "super CDW" or "zero-deductible") to buy down the deductible to or near zero. This is pricey — figure about an additional $10–30 per day — but, for some travelers, it's worth the peace of mind.
Since most of the major car-rental companies come with these astronomical deductibles, the alternatives to CDW are worth considering carefully.
Many credit-card companies offer their own type of zero-deductible collision coverage (comparable to CDW). By paying for your car rental with a credit card that offers this coverage, you can choose to decline the car-rental company's CDW coverage. Dealing with credit-card coverage can be a hassle if you do wind up needing it, but since rental companies' CDW costs can stack up, it can be a worthwhile trade-off.
Basically, if your car is damaged or stolen, your credit card will cover whatever cost you're liable for. Of course, restrictions apply and coverage varies between issuers (for example, lately American Express has been offering its cardholders "premium" car rental insurance for about $25 per rental — not per day — that covers more than just CDW). If you opt for this coverage, get a complete description of it from your credit-card company, and ask in which countries it is applicable, the maximum number of rental days they'll cover, and the types of vehicles that are eligible. Have them explain the worst-case scenario to you.
To use the coverage provided by your credit card, you'll have to decline the CDW offered by your car-rental company. Therefore, as far as some rental companies are concerned, you're technically liable 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 — particularly 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 CDW insurance.
If you have an accident, the rental company will charge your credit card for the value of the damage (up to the deductible amount) or, if the vehicle is stolen, the value of the deductible associated with theft. It's up to you to seek reimbursement for these charges from your credit-card company when you get home (you'll need to submit the police report and the car-rental company's accident report). American-based rental companies can be easier to work with if you have a claim to resolve.
Be warned that if you accept any coverage offered by the car-rental company, you automatically forego any coverage provided by your credit card. (In other words, if you buy CDW that comes with a $1,000 deductible, don't expect your credit card to cover it.) This may also be the case if you book and prepay for a rental that already includes CDW and/or theft coverage.
Travel Guard Collision Insurance
Travel Guard sells renter's collision insurance at very affordable rates ($9/day plus a one-time $3 service fee for coverage up to $35,000, $250 deductible, tel. 800-826-4919). It's valid everywhere in Europe except the Republic of Ireland, and some Italian car-rental companies refuse to honor it. If your car-rental company doesn't accept this coverage, and you have to buy other coverage to replace it, Travel Guard will refund your money. Note that various US states differ on which providers and policies are available to their residents.
Remember that some comprehensive travel insurance policies include collision coverage if you rent your car through a travel agent. For details, see Do I Need Travel Insurance?.
Exceptions for Italy and Ireland
If you rent a car in Italy, you're required to have theft insurance, and most car-rental company rates automatically include CDW coverage (which you sometimes can't decline). Even if you decline CDW when you reserve your Italian car (because you've arranged other coverage), you may discover — when you show up at the counter — that you must buy it after all.
Car-rental companies in the Republic of Ireland are less amenable to letting renters waive CDW insurance in favor of credit-card coverage; some companies will only allow specific credit-card brands to be used for that purpose. Check with your issuing bank to see if you are covered in Ireland, and bring written confirmation with you. Also unique to Ireland is that you sometimes have the option of buying down the deductible on your CDW at the time of booking (for an additional $15–30/day), rather than when you pick up the car.
It's unusual to purchase additional liability insurance when renting a car in Europe. With most European car-rental companies, any liability coverage you might need is already included in the price, as the coverage is required under local law. But if you're concerned about this, ask for details when you rent.
The Final Say
Buying CDW — and the supplemental insurance to buy down the deductible, if you choose — is the easiest but priciest option. Using the coverage that comes with your credit card is cheaper, but can involve more hassle (call your credit-card company and check the fine print before you depart). If you're taking a short trip (but not in Italy or Ireland), the simplest solution is to buy Travel Guard's very affordable CDW. For longer trips, leasing is the best way to go.