Car hire may carry with it the risk of incurring large costs in the event of an accident. One way to protect against these risks is collision damage waiver insurance.
To understand this form of insurance it is necessary to briefly discuss general car hire insurance.
When hiring a car, in many countries the hire price may or may not include some components of insurance – often third party, fire, theft, and probably what’s called CDW (collision damage waiver).
CDW offers the hirer protection against damage to the hired vehicle in the event of an accident but unfortunately this form of protection is often limited in two important respects.
Firstly, normal ‘in the price’ CDW will likely have ‘an excess’. The excess is that amount that the renter would be expected to pay in the event of an accident. If the total cost of any damage and claims was 1500 and the CDW excess was 500, then the renter would be expected to pay the 500. Sometimes the excess can also apply to other components of the insurance such as the third-party cover.
Secondly the basic CDW will also typically exclude damage to items such as the wheels, tyres, windows, roof and sometimes the lights. These are all areas easily damaged in even a minor accident and repair costs may be high.
A hirer that is uneasy over the risks and exposures outlined above does have the two ways of dealing with them – ‘top-up’ insurance and collision damage waiver insurance.
When renting a car it is usually possible to buy additional rental insurance through the car rental company. This will reduce the excess amounts payable in the event of an accident and sometimes increase cover to areas of the vehicle normally excluded under the basic CDW cover. This additional insurance has several names including ‘top-up insurance’ or in some cases the car rental company may call it ‘collision damage waiver insurance’.
Should there be an accident, the renter will still pay the excess amount directly to the car rental company, but this amount can then be claimed back from the insurance company through the collision damage waiver insurance. As policies of this type are sold to an individual policyholder and are not restricted to any single car hire, they can cover all vehicle hired by the policyholder during a given period of 3, 6 or 12 months etc.
This may give cost advantages over the additional insurance available through the car hire company.
Like all insurance policies, collision damage waiver insurance purchased from an insurance company may have its own restrictions and limitations such as the exclusion of commercial or sports vehicles etc. The details of the policy should be checked carefully to ensure they are going to meet the renter’s needs.
Version 1.0 Released 05 February 2009
