Rental car insurance can be a tricky thing. The ‘credit card has got you covered’ theory has been thrown around quite a bit, and as a result, I have often declined the optional rental car insurance coverage when traveling.
However, your credit card provider might not have you completely covered after all, upon further inspection. A deeper dive in to this point-of-sale decision dilemma is needed. So let’s do it. First, we’ll start with some common terminology to break this down.
What is a Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)
To break this down, you must first know the lingo. When you rent a car and are offered ‘coverage’ or ‘insurance’, you’re offered a CDW/LDW damage waiver. It’s not really an insurance policy, rather you are paying the rental company for them to take responsibility (as they are already insured) in the event of damage or theft, versus passing it along to you.
Liability Insurance vs. CDW
Note that CDW and LDW’s don’t cover liability protection (in the event you harm someone or something and legal action is brought against you). Rental providers charge additional fees for this coverage. If you have a personal auto insurance plan, you’re likely covered on rentals (but you should check to be sure).
Before you rent your next car, you should look into the following:
Does your Personal Auto Insurance Policy Cover Damage/Theft on Rentals?
It just might. Every policy differs, and this is something that you can usually add in. If it does not, that’s where your credit card might come in handy. Credit cards often protect you in the event that you don’t have the coverage via your primary auto insurance. However, if you do have the coverage via your auto insurance, it defaults to them.
Rental Car Insurance Coverage from Credit Cards
Credit card companies do not cover liability, but most do have a CDW/LDW type coverage.
American Express: The American Express car rental coverage page says:
Car Rental Loss and Damage Insurance provides Authorized Driver(s) with insurance coverage for Damage to or Theft of most Rental Vehicles when the Card Member uses the Card to pay for the Entire Rental from any Rental Company. Damage to or Theft of a Rental Vehicle coverage is always secondary to any other insurance.
Visa: The Visa car rental coverage agreement states:
Receive auto coverage for damage due to collision or theft. To activate the coverage, complete the entire rental transaction with your eligible Visa card and decline the rental company’s collision damage waiver (CDW) coverage if offered by the auto rental company. Available to all Visa Standard Credit, Visa Rewards Credit, Visa Signature®, Visa Signature Preferred® and Visa Premium Rewards cardholders. It may also be available on other card products, call your issuer to see if you have this benefit.
MasterCard: The MasterCard car rental coverage agreement claims
You must initiate and then pay for the entire rental agreement(tax, gasoline, and airport fees are not considered rental charges) with your covered cardand/or the accumulated points from your covered cardat the time the vehicleis returned. If a rental company promotion/discount of any kind is initially applied toward payment of the rental vehicle, at least one (1) full day of rental must be billed to your covered card.
Discover: The Discover car rental coverage statement states:
The Collision Damage Waiver Coverage is provided to you, as an Insured, automatically when the entire rental fee for the Rented Automobile is charged or debited to your Account. It is not necessary for you to notify the Company at the time the rental fee is charged or debited to your Account.
Some Cautions Before Relying on your Credit Card for Damage & Theft Coverage
It might not always make sense to rely on your credit card for CDW coverage. Always take the following precautions:
- Read the fine print. Find out how much your specific card covers, under what rental day lengths, if it covers theft, etc.
- Note that debit cards often do not carry the same coverage.
- You must actually use the credit card you want protection from on the purchase. Makes sense.
- Call the company and file the claim immediately (that day or the next day). All providers have a specified period after which notification and claims are no longer accepted.
Car Rental Insurance Checklist:
Here is how I’m going to approach making sure that I’m covered before my next car rental.
1. I will call my primary insurance provider to:
Find out if liability protection is extended to rentals. If it is not, how much would it cost to add it? Compare this to what rental companies charge and go with the cheaper option.
Find out if collision, other damage, and theft are extended to rentals. Again, if it is not, how much would it cost to add it and would it be better to pay for this than just use my credit card protection?
2. I will see what kind of coverage my credit card provider has.
If it’s not enough and my primary insurance provider doesn’t cover it, that is really the only time I’d need to purchase a CDW. And even then, if this is a business trip, find out if your corporate card has better coverage than your personal.
If you’re covered, decline CDW.
That’s it! A half hour of research or so will go a long ways to easing your mind and saving you some money every time you rent.
Car Rental Discussion:
- Have you ever been in an accident or had a car rental stolen? What happened? Who foot the bill?
- Do you still purchase CDW even if your personal plan or credit card has you covered? Why?