Home Rental Cars Should You Pay For The Loss Damage Waiver (LDW) When Renting A Car?

Should You Pay For The Loss Damage Waiver (LDW) When Renting A Car?

by joeheg

It’s easy to forget that when you rent a car, you’re “borrowing” a vehicle that costs tens of thousands of dollars from a major corporation. When renting it, you expect the car to be in excellent condition with no dents, dings or scrapes on it. So what happens when the car is damaged during your rental? Even if it wasn’t your fault, the rental car company is, of course, going to expect you to pay for the repairs. Rental car companies know the fear of getting a hefty bill for repairs makes you an easy target to purchase the “insurance” they’ll sell you for just a few dollars a day.

We’ve already written about the excessive charges for gas and the markup on tolls that car rental companies charge. Why would we believe that all of a sudden car rental companies will sell you insurance at a reasonable price? It’s not that the coverages they sell aren’t necessary, because they are. It’s moreso you may already have coverage that makes buying their insurance unnecessary. Knowing what coverage you already have allows you to make an informed decision ahead of time. I’ll also share a trick that lets you avoid the hard sell at the counter. But first, what is the car rental company trying to get you to buy?

Most of the information listed below only applies to cars rented in the United States. Rentals in other countries have different rules and restrictions. Please note I’m neither an insurance agent nor an expert, so I suggest reading the policies including, but not limited to the parts about policy limits, deductibles and exclusions.

Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW)

These names are used interchangeably but they mean the same thing. When you purchase a loss/collision damage waiver, the rental car company won’t look to you for payment to repair the car if it’s damaged or stolen during your rental. Interestingly enough, this is NOT INSURANCE. The vehicle is already insured by the rental car company (or if it’s a large company, they may be self-insured). Think of the waiver as a “free pass” that gets you off the hook in case something happens to the vehicle while it’s in your possession.

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As part of the rental agreement, you can be held responsible for more than just the damage to the car. You are also required to pay for the lost rental revenue for the number of days the vehicle is out of service for repairs. Depending on the amount of damage, these charges can add up, so it pays to have some sort of back up plan.

Buying the LDW/CDW from the car rental company is one way to cover these expenses, should they happen. There also other ways you’re protected that you may not know about.

Auto Insurance

If you own or lease a car and have car insurance in the U.S., you’ll probably have coverage for a rental car for personal use. The rental vehicle will have the same coverage as your primary vehicle and you’ll be responsible for the same deductible and coverage limits as if it was your own car. The downside is that filing a claim for damage to a rental car will affect your policy the same as if the loss was to your car, so your premiums may increase, or you may be dropped from your insurance as a result of the claim.

Credit Cards

Chase Sapphire Preferred

Many U.S. credit cards provide coverage for rental car damage. Personal credit cards will cover for rentals for personal use and business cards will provide coverage if you’re using the car for business use. For this coverage to take effect, you need to fully pay for the rental with the card.

There are two types of coverage that credit cards provide – secondary and primary. Secondary coverage is what most credit cards offer and it will cover all expenses you are responsible for AFTER all other coverage is exhausted. This means you’ll have to put in a claim to your auto insurance and the credit card insurance will pay for out-of-pocket expenses (things like your deductible and loss of use charges). If you don’t have your own auto insurance, the secondary coverage provided by these cards would then act as your primary coverage.

Some cards provide primary coverage. This is a big difference and makes it worthwhile to use a card with this type of coverage for car rentals. Primary coverage means you DO NOT have to put in a claim to your personal insurance as the credit card coverage will pay for the whole amount of the loss. Personal Cards that provide PRIMARY coverage for damages to a vehicle are:

Business cards that provide Primary Coverage for rental cars (only when rented for business use) are:

  • Chase Ink Preferred Business Credit Card
  • CitiBusiness AAdvantage Platinum Select
  • Marriott Rewards Premier Business Credit Card
  • United MileagePlus Explorer Business Credit Card
  • United Club Business Credit Card

Additional Credit Card Insurance

While many cards from American Express offer secondary coverage, AMEX also offers Premium Car Rental Protection. If you enroll for this program, any car rental that you charge to your American Express cards will automatically be covered with PRIMARY coverage. The price for this coverage varies between $12.25 – $24.95 PER RENTAL (depending on coverage limits and where you live). Note this is a flat charge per rental, regardless if you rent for one day or thirty days. If you want the peace of mind of having primary coverage and tend to rent cars for longer periods of time, this might be an excellent option for you. NOTE: I’ve signed up for this coverage before and didn’t know that once you sign up it seems to apply to ALL of your American Express cards, not just the one you use to sign up for the program.

Third-Party Insurance

If you don’t have your own car insurance and you don’t have any credit card that provides coverage, you still have another option instead of buying insurance from the car rental company. Several insurance companies will sell you separate Loss Damage Waiver coverage. I haven’t ever used this type of service, so I’d do a bit of checking before buying a policy. Some of the websites in this group I found that were backed by major insurance companies are:

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The first two companies listed will also sell policies to those who reside outside the United States. There are limitations on some policies depending on where you are renting the car, so you’ll need to check the individual websites before purchasing.

Travel Websites

If you are from outside the U.S. and booking your rental/hired car from a travel website, you can often buy CDW/LDW coverage direct from them when making your reservation.

Rental Car Companies

I include this in the list because it’s an option. However, you’ve hopefully been able to find some other way to get coverage before renting a car. If you haven’t done that, then buying the coverage from the rental car company may be your only option.

However, even if you’ve purchased coverage, the rental car employee may still try to sell you coverage at the counter. They may receive a commission on the policies they sell or might have a quota they need to meet. You’ll hear them tell you the policy you have isn’t good enough or you may still have to pay thousands of dollars if something happens to the car, even it is isn’t your fault. You’ve done your homework (ahem – make sure you have done your homework!) so stand your ground. Tell them it’s not necessary to buy the coverage and you already are covered by (whichever option you’ve used from above). They’ll usually know they’re dealing with someone they can’t sway to make the purchase and just finish your paperwork. Hopefully, your experience at the counter doesn’t make you feel like this.

An alternative and much easier way to avoid this uncomfortable conversation is to sign up for the Frequent Renter programs offered by the rental car companies. These programs are free to apply for and you can put in your rental preferences like if you want to accept the insurance coverage, pick your preferred car size and say if you want to pre-pay for the gasoline. With most rental companies at larger airports, you’ll be able to skip the counter entirely and go directly to the lot and get your car. If you haven’t signed up for these programs, do so now; it changes the whole rental experience.

Final Thoughts

Hopefully, this article gave you a better understanding of what the Loss/Collision Damage Waiver is and if you should pay for it when renting a car. There are other types of insurance that car rental companies will try to sell you, and I’ll go over what they are and if you should buy them in another post.

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This post first appeared on Your Mileage May Vary

16 comments

Should You Get The Three Types Of Rental Car Insurance? – Your Mileage May Vary February 26, 2018 - 8:00 am

[…] caused by your negligence. These claims can be quite costly so it pays to be covered and, although some credit cards will pay for CDW, none will provide coverage for […]

Reply
Delta’s Trying To Look Neutral, New Amex Changes, The Stupidity Of a Loyalty Program + More… – Your Mileage May Vary March 11, 2018 - 1:01 pm

[…] always book our rental cars using a card that gives primary rental insurance for damages. Here’s an example of how the Chase Sapphire Reserve’s coverage paid for hail […]

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Credit Card Review: Chase Sapphire Reserve - Your Mileage May Vary February 4, 2019 - 8:41 pm

[…] great feature of this card is that it acts as primary coverage when you rent a car. In normal terms, if you get into an accident in your rental car, you can use the coverage from […]

Reply
Jeremy March 24, 2019 - 7:40 pm

You forgot the City National Bank Crystal Visa Infinite has primary auto insurance, as well.

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joeheg March 24, 2019 - 8:52 pm

Thanks for pointing out the omission. I’ve updated the post.

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Christian March 24, 2019 - 9:49 pm

Great post. Maybe doing a followup about liability insurance might be a good addition on the rental car insurance front.

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joeheg March 25, 2019 - 9:40 am

Liability and the other coverages that car insurance companies offer are to be covered in another post.

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DaninMCI March 24, 2019 - 10:39 pm

I believe chase requires you to decline the rental car company cover in order for them to assume or provide coverage. Most personal car insurance in USA only covers rental cars in USA and Canada. Most rental car companies actually sell policies not self insure. Zurich is one of the bigger players in this market. Typically the rental car company gets a cut of the additional insurance price per day, per car.

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joeheg March 25, 2019 - 9:42 am

If you have primary coverage through a credit card, there’s no reason for you to buy the coverage from the rental car company. As for international coverage, I didn’t get into all the particulars since every country is different and I have no experience renting outside the US.

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Debit March 24, 2019 - 11:59 pm

Very comprehensive and useful.

Are all the credit card coverage worldwide?

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joeheg March 25, 2019 - 9:44 am

The article focuses on renting a car in the USA. I do know that some coverages, such as Chase, are good almost everywhere but you’d need to check with your bank to make sure.

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Debit March 25, 2019 - 12:04 am

Also with amex premium insurance the main reason for carrying chase sapphire card is negated. And they don’t distinguish personal/ business. Why carry chase sapphire?

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joeheg March 25, 2019 - 9:45 am

With AMEX premium coverage, you need to pay an additional fee with every rental. With the Sapphire, you get primary coverage included as a card benefit.

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Debit March 25, 2019 - 10:21 am

Yes but that fee is per rental and less than the annual fee of the chase card. If you rent less than 4 times a year you don’t need the chase card.

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joeheg March 25, 2019 - 10:37 am

If the only thing you value a Chase Sapphire card for is the primary rental coverage, you are correct. I doubt there are many people where that is the only criteria they are using to make such a decision. There are the travel protections which are much better from Chase and earning 2-3x Ultimate Rewards per dollar spent is another factor. And if you have a premium card from AMEX, like a Gold or Platinum card, those annual fees are even higher than a Sapphire Preferred.

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DaninMCI February 15, 2020 - 2:19 pm

Good blog post as always. I might also add that if you rent a large vehicle like a Rental truck, heavy pickup or 12+ passenger vans your personal car insurance may not cover this. I would credit cards also have exclusions for this as well.

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