Reducing your liability with CDW insurance

CDW insurance (Collision Damage Waiver insurance) is one way of reducing the risks of incurring large additional costs following an accident with a hired car.

When a car is hired, most car hire companies will provide a form of limited insurance with it as ‘included in the price’. In many countries this basic cover may or may not include third-party risks, fire, theft and a limited form of cover for the hired vehicle itself with this latter called CDW. The specifics of insurance cover should always be checked at the point the vehicle is hired or the booking made. 

In the cases where the rental agreement and basic cost include CDW, this means that some components of damage to the hired vehicle may be covered in some circumstances.

This basic CDW offered by car hire companies may contain two significant limitations.

Firstly it may be subject to excess – that is the amount payable by the hirer in the event of any claim. This may be called the ‘first part’ of a claim and basically means that if damage arises to a value of 1500 and there is an excess of 500 on the policy, then the hirer will need to pay the ‘first 500’ themselves.

Secondly the CDW may contain a number of very important exclusions. Typically damage to areas such as the roof, lights, wheels, tyres and windows may all be excluded. All these areas of a vehicle are amongst those most commonly damaged in accidents – even those considered as minor.

Due to the excess and the exclusions, the costs to the hirer should an accident arise could be very significant and this risk can generate stress and tension when the hired vehicle is actually in use.

If the excess and exclusions are of concern, there are two ways of dealing with this.

It may be possible to reduce the excess and increase the cover by paying a higher amount to the car hire company for the CDW. This is sometimes called ‘CDW top-up’ or ‘additional CDW insurance’.

Alternatively, there are specialist insurance companies that offer CDW insurance to policyholders on a monthly, quarterly or annual basis. As these relate to a policyholder as opposed to a single hire agreement, they cover all rentals during the period rather than a single vehicle. This may offer significant cost advantages over buying CDW insurance on a hire-by-hire basis. Many policies of this type will also offer broader coverage than that available through car hire companies and this may include cover for things such as wheels, tyres, roofs and windows etc.

In the unfortunate event of an accident, the hirer of the vehicle will still need to pay any excess as outlined by their car hire company. This can be claimed back through their CDW Insurance policy.

As with all insurance, CDW insurance policies should be checked for their own exclusions and conditions. Some may exclude commercial or other specialist vehicle types or vehicles of unusually high value such as vintage, antique or prestigious marques. The buyer will need to be certain that the particular policy conditions and cover are going to be suitable for their needs.