Collision damage waiver explained

When renting a car, the hirer may have Collision Damage Waiver (often referred to as ‘CDW’) included in the price or be offered an enhanced version of it for an additional cost. This is in effect, a form of insurance covering certain risks to the rented vehicle while being used by the hirer.

The position with respect to car hire insurance and collision damage waiver can at times be a little complicated and may well vary significantly by individual rental company and country. What follows here is a brief outline and summary – hirers should always check carefully the specifics of their rental company and its policies.

At rental time, rented vehicles may have included in the rental price a basic level of insurance. In some countries this basic cover may or may not include third-party risks, fire, theft and CDW.

In a situation where CDW was not included in the basic ‘in the price’ insurance cover, this would mean that any damage to the vehicle itself would need to be paid for by the hirer.

Many car rental companies offer at rental time, or include in the basic price, a limited form of CDW that covers some types of damage to the hired vehicle. This basic CDW cover may often exclude many areas of a vehicle that are commonly and expensively damaged such as the wheel areas, windows, tyres and roofs.

As the hirer may have little control over who repairs any such damage and under what circumstances, the costs involved in cases of even minor damage could prove significant.

Although the specific conditions and clauses will vary, the basic collision damage waiver will also often only insure the hirer against vehicle damage once the costs of any repairs have exceeded a certain level – usually called ‘the excess’.

What this means in practice is that if the vehicle gets damaged to the tune of 1000pounds/dollars value and it has a 500pounds/dollars excess, then the hirer will be expected to pay the first 500 of the damage themselves and the collision damage waiver cover would pay the remainder.

The hirer may be offered additional collision damage waiver insurance by the car rental company as a way of both covering some of the excluded damage risks to the rented vehicle and reducing the excesses payable in the event of an accident.

Some insurance companies also specialise in selling collision damage waiver cover to policyholders and this would cover all of the policyholder’s vehicle rentals for a given period of several weeks, months or a year. It can be purchased on-line and policies of this type are not restricted to any single hire company or car rental – they relate to a named policyholder. This approach may offer major cost advantages over the top-up insurance offered on a rental-by-rental basis by the car hire company.

It is also possible that collision damage waiver policies taken out with specialist insurance companies will offer further advantages as they typically will also cover many areas of damage that are excluded from the policies of car hire companies such as the wheels and tyres etc.     

Any insurance policy, including one covering collision damage waiver, should always be checked carefully in advance to ensure that its cover, exclusions and conditions, all meet the policyholder’s needs.