Rental Car Insurance: A Closer Look


Insurance researchers are urging car owners and motorists to rethink the way they perceive insurance offers made by rental companies. In the past, industry specialists often recommended ditching signing a “collision damage waiver” or CDW, when renting a car. Apparently, even insurance agents called the CDW a “hassle insurance” because of the delay and problems that arose if a policyholder avails of it.

Rental Car Insurance: A Closer LookExperts often advised policyholders against signing on for a CDW, adding that it is often too expensive and unnecessary. Agents would also tell clients that these agreements are only significant because they release the policyholder from any liability should the rental car be damaged or stolen. With rates of up to $20 per day, CDWs were often thought of as an unnecessary expense.

Travel experts offered different alternatives to paying for CDW. According to many specialists, most policies already cover rental cars. This means that there is no longer a need to avail of a CDW because the insurer will take care of any damage to the rental vehicle. Experts even recommended paying for rental services with a credit card that provides certain accident coverage to save on money.

Nowadays, researchers are cautioning Americans against taking up any of the suggestions so easily. Insurance Information Institute president Carolyn Gorman says that buying a CDW can often make more sense than foregoing it. While not exactly light on the budget, the added coverage can be a potential money-saver in the event of an accident.

Not availing of a CDW can have serious financial consequences for a policyholder. For example, most rental car companies not only require drivers to pay for repairs, they often charge lost revenue to motorists. Experts say that this can mean thousands of dollars more out of the policyholders’ pockets. Aside from this, companies would also charge drivers for the “diminution of value” or the estimated loss of value of a damaged rental car in case the company opts to sell the vehicle.

When motorists pay for rental cars with plastic, the companies can easily charge these added expenses to credit cards. Even if insurance providers cover rental cars, the deductibles will still be charged to credit cards. While convenient, this can mean that cardholders will have to suffer declining credit ratings. Insurance premiums will also go up because of an incident involving rental cars. Worse, even card companies will refuse to pay for repairs because the insurance they offer are mostly secondary coverage. Primary insurance providers will have to shell out money before the card issuers follow suit.