Car-Rental Insurance and the Collision Damage Waiver (CDW)
By Rick Steves
When you rent a car, you can be liable 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.
Baseline rates for European rentals nearly always include liability coverage — for accident-related damage to anyone or anything outside the car. (The company may offer additional liability insurance, but I wouldn't buy this without some extenuating reason.)
It's (usually) 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) through the car-rental company (easiest but most expensive),
- Use your credit card's coverage (cheapest), 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 choice but to buy the company's CDW. If you need a car for at least three weeks, you're probably better off leasing, which includes zero-deductible collision and theft insurance (and is tax-free to boot).
Note that theft insurance covers just the loss of the car itself, not anything stolen from inside it (see my tips on protecting your car from thieves).
Car-Rental Company CDW
The simplest solution is to buy a CDW supplement from the car-rental company. This coverage technically isn't insurance — 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. Note that this "waiver" doesn't actually eliminate the deductible, but just reduces it. CDW covers most of the car if you're in a collision, but usually excludes the undercarriage, roof, tires, windshield, windows, interior, and side mirrors.
CDW generally costs $15–30 a day (figure roughly 30–40 percent extra). Sometimes the CDW charge itself is a little less when combined with theft/loss insurance as part of an inclusive rental rate — and it's often cheaper to pay for this kind of coverage when you book than when you pick up the car.
When purchasing CDW, the deductibles can still be substantial, with most hovering at about $1,000–1,500 (or more, depending on the car type). Most rental companies also offer a second tier of coverage, called "super CDW" or "zero-deductible coverage" to buy down the deductible to zero or near zero (if you didn't opt for this when booking from home, expect to hear a sales pitch from the counter agent). This is pricey — figure an additional $10–30 per day — but, for some travelers, the peace of mind is worth it. There's a huge comfort in knowing you can bring your car back in an unrecognizable shamble and say, "Sorry, I'm new in this country."
When comparing rental options online, beware that some European rental agencies quote "basic" rates that include CDW/theft coverage. (In this case, it's not an optional extra, so you can't decline it.) If these CDW-inclusive rates seem too good to be true, they probably 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 reasonable level.
Given these costs, the alternatives to paying for the rental company's CDW are worth considering: credit-card coverage or collision coverage through your travel-insurance provider.
Car-company CDW surcharges can seem like a racket when you consider that most American credit cards already include collision coverage. By paying with the right credit card, you get zero-deductible collision coverage (comparable to "super" CDW)…likely for free. In other words, if your car is damaged or stolen, your credit card will cover whatever costs you're liable for. The only major downside: If you do end up in an accident, dealing with credit-card coverage can be more of a hassle than what you'd encounter with the car-company CDW. But if a potential headache seems like a worthwhile trade-off for certain — and significant — cost savings, look into this option.
To make this work, first double-check that your credit card does indeed offer this coverage (Visa, MasterCard, and American Express usually do — but not Discover). Remember that restrictions apply and coverage varies between issuers: Get a complete description of the coverage offered by your credit-card company. Ask in which countries it is applicable, which parts of the car (if any) are excluded, the types of vehicles that are eligible, whether it covers theft/loss, the maximum reimbursement 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 exceeds that number, your card won't cover any of the rental). Have them explain the worst-case scenario to you. It can be smart to ask for a "Letter of Coverage" — take a hard copy of it with you to the rental counter in Europe.
Once you've confirmed your credit card's coverage, be sure to decline the CDW offered by your car-rental company. If you accept any coverage offered by the rental agency, you automatically forego 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 rental that already includes CDW and/or theft coverage — don't sign any rental contract until you're sure that by doing so you're not accidentally accepting the rental company's coverage.
A credit card's collision coverage applies 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 reserve the car, but also to pay for it and any other related fees, whether when booking at home, or when picking up or dropping off the car in Europe — switching cards can invalidate the coverage.
If you get in 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 then 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. (When deciding between rental companies, consider that American-based rental companies can be easier to work with if you have a claim to resolve.)
Be warned that, as far as some rental companies are concerned, by declining their CDW offer, 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 their CDW.
Since most credit card companies don't offer collision insurance to European cardholders, counter agents — especially those unaccustomed to American clients — may be skeptical that declining their CDW is a prudent move (all the more reason to have hard-copy proof of your credit-card coverage on hand). Don't be surprised if you hear a warning about how credit cards provide only "secondary" coverage — that's moot 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, for example, 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 refuse to honor it.
If you do go with an insurer's comprehensive travel coverage, be sure to add the insurance company's name to your rental agreement when you pick up the car.