Rental Vehicle Insurance
CDW, LDW: What Are They? What Do They Protect and Not Cover?
Properly insuring rental vehicles for accidents, theft, injury and damage can be tricky. Understand what rental company vehicle and car insurance does and does not cover.
A rental car contract is a document few read but always sign at the airport counter. Buried in the thick language of the rental agreement are some potential legal land mines, impenetrable clauses and paragraphs that, if violated or invoked, can turn a business trip, dream vacation or a do-it-yourself U-Haul style household move into a financial quagmire.
At the rental counter, the agent will offer CDW, LDW, SLI and other “insurance” options, packaged or a la carte, all at an extra cost. Often clueless and nervous about the vague, ominous consequences of having an accident in an unfamiliar vehicle far from home, many travelers initial “I AGREE” and pay as much for protection as what the car rents for.
One can decline the rental firm’s coverage, and instead depend on protection perks built into a credit card, or rely upon on a personal auto insurance policy. Either way let the buyer beware. Since the renter is responsible for any loss or damage to a rental vehicle, regardless of who is at fault, it’s important to know if, when and how much coverage applies.
Insurance offered by the rental car company
The expensive “insurance” offered by the car rental companies is frequently not insurance at all. The protections offered are usually waivers. In legal terms, a waiver is the relinquishment or forfeiture of a right: the rental company waives its full right, or portion thereof, to demand payment for loss or damage to its car during the rental period.
These are the common coverage options offered by vehicle rental firms
- Loss damage waiver (LDW) or collision damage waiver (CDW). Generally these mean the same thing. Drivers who select and pay for this coverage are insulated from the rental car firm collecting for damage to or theft of the rented vehicle, as well as towing expenses, storage and administrative fees, and loss of use charges associated with an accident.
CDW and LDW only cover the rented vehicle. These waivers do not protect against damage to other cars or property, or for bodily injury. Full LDW is expensive, but since it is essentially a zero-deductible bumper-to-bumper physical damage policy, it is generally effective in indemnifying against a damage or theft loss. When purchasing this waiver coverage, inquire if there are conditions or exceptions. For example, CDW may be void if an accident involves speeding, or driving off road, on unpaved roads or while intoxicated.
- Partial LDW is a modified CDW/LDW whereby the rental firm waives a set amount, typically from $500 to $3000, and the renter pays for any excess loss or damage up to the full retail value of the vehicle. For example, if a rented $35,000 SUV were stolen and never recovered and the renter carried LDW $500, he or she would be liable for the $34,500 difference. A driver with a full coverage personal auto insurance policy (PAP) could expect their insurer make up most or all the deficit, but PAP policies vary, so check first.
- SLI—supplemental liability insurance. This coverage protects rental drivers against claims and lawsuits for bodily injury and death, and damage to property other than the rented vehicle. Renters not carrying similar liability protection via their personal auto or credit card policies should strongly consider selecting this coverage.
