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NICK ZUPKE
HNI Personal Lines Account Executive
When renting a car, you will be offered the option of purchasing a collision damage waiver (CDW). A lot of our personal lines customers ask us — do you really need this?The collision damage waiver is an insurance policy keeps the rental company from coming after you for collision damages. This protection may be well worth the investment — according to the National Safety Council, the average cost of injury in a car accident is $61,600.
Here are 10 things to consider when deciding whether to purchase or decline this optional coverage.
1. You May Wind Up Buying The Rental Company A New Car
By deciding to skip a collision damage waiver, you put yourself at risk of buying a new car for the rental company. That’s because the personal auto policy only may require the insurance company to pay the lesser of the “actual cash value” of the damaged vehicle or the amount “necessary” to repair or replace it.Many rental car agreements require you to reimburse the rental company for the “full value” of a damaged vehicle. A personal auto policy protects the insurance company from paying too much for a damaged vehicle.
The question is — who is protecting you from paying the difference? That's what the collision damage waiver will do for you.
2. Your Personal Auto Policy May Not Have Your Back
We just looked at what can happen when the personal auto policy leaves a gap. Now let's look at what can happen if it disappears completely.There is a little known clause in most personal auto policies that gives the insurer the right to “appraise and inspect the damaged property before its repair or disposal."
This is another clause designed to protect the insurer from overspending for repairs. But what happens if the rental company makes the repair before the insurance company inspects the damaged vehicle?
You may find yourself holding the bill when the insurance company voids the personal auto policy because the insurer was not able to inspect the damage.
3. What Will You Do If Your Credit Card Is Suddenly Maxed Out?
What would happen if your credit card was instantly maxed out? That's a question to consider before deciding to pass on the protection of a collision damage waiver.Some rental agreements require immediate payment for damage to rental cars, and a car rental company will use your credit to make sure they get it.
With the high cost of collision repairs, a collision damage waiver is a great way to ensure this doesn’t happen to you.
4. You May Wind Up Paying For A Car You’re Not Driving
The limits built into most personal auto policies mean you may be responsible for paying the rental car company for its loss of rental income on the damaged car. You may be paying the rental fee while the damaged car sits in a garage waiting to get repaired.How do you protect yourself from “paying to park”? The collision damage waiver will make sure that the only car you are paying to rent is the one getting you where you need to go.
5. Your Personal Auto Policy May Have Some Unexpected Coverage Gaps
The terms of personal auto policies can be very restrictive. It’s common to have terms in the coverage that exclude other drivers and even other business-related driving.A collision damage waiver can be used to help clear up who is covered and fill some gaps that may be excluded in the personal auto policy.
6. Your Coverage May Exclude Some Vehicles And Territories
Did you know that most personal auto policies only cover $500 in damage to a trailer? Your personal auto policy also may exclude damage done to motorcycles and motorhomes. It also may exclude damage that happens outside the United States.7. You May Wind Up In Court
Your personal auto policy may state that it is excess over:- Any coverage provided by the owner of the auto
- Any other applicable physical damage insurance
- Any other source of recovery applicable to the loss — travel policies, credit card coverages, etc.
In plain English, that means the personal auto policy is not intended to be first in line to cover the costs of a rental car accident.
If you’re hoping the personal auto policy will cover all damages from your accident, you may find yourself going to court.
8. Administration Fees May Bust Your Budget
Repairs are not the only expense after an accident. There are other administrative costs, such as towing, which normally are not covered by a personal auto policy.9. You Can Protect Your Driving Record And Save Your Deductible
For the low cost of a collision damage waiver, you can protect your driving record and save your deductible.Personal auto policy deductibles usually are fairly high to keep the monthly payment low. That works great until you need to use it. That's when the high deductible can come back and take a bite out of your budget.
It's also important to remember that the collision damage waiver is a one-time investment. Claiming the accident against the collision damage waiver coverage does not negatively affect your personal auto policy. This is important if you want to keep you monthly insurance payments low.
10. Your Personal Auto Policy May Not Cover The Theft Of Your Rental Car
What happens if your rental car is stolen? Many rental agreements require reimbursement if the car is stolen. In 2011, California alone had 156,796 cars stolen.Rental agreements also may require reimbursement for “loss of value” for any number of other reasons. Once again, the question is, Who will pay for the uncovered losses?
A collision damage waiver takes the pressure off by covering you in cases where your personal auto policy leaves you at risk.
Collision Damage Waiver — A True Must Have
Finding a good rental car is about peace of mind. You want a car that's reliable and a company that will get you on the road fast.
With its low cost and high value protection, a collision damage waiver will give you peace of mind and protect your wallet from the high expense of an accident in a rental car.
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