CDW stands for ‘Collision Damage Waiver’ and it is a form of car rental insurance.
When renting a car, in many countries the rental price will include some forms of insurance. In others, with the USA being the best example, the vehicle may come with little or no insurance included in the basic rental price and the car hire company will offer it as an optional extra.
Car rental insurance is similar to private motoring insurance in that most people will want to know that the vehicle is covered against the three classic forms of risk – theft, third party liability and damage to the rented vehicle itself. Third party liability covers the potential costs arising from an accident that injured another person or their property and theft insurance covers the illegal taking of the vehicle.
Damage to the rented vehicle itself is covered by the insurance known as CDW. It is important for any renter to understand that if the vehicle is not covered by CDW, third party liability or theft then they are legally and financially responsible for all costs in these categories.
It is because of these financial risks that most people will look to purchase insurance that protects them. If it is not already included in the rental price, a basic form of CDW can be purchased from the car rental company. In reality, this basic CDW insurance will contain certain limitations.
It is likely that the basic CDW obtained from a car rental company will exclude several areas of the rented vehicle from its cover. Typically this would include wheels, tyres, general undercarriage, roofs and windows. It is very easy to damage these parts of a car even in a minor accident and the repair costs can be high.
Basic CDW will also usually carry excess. The excess is a financial amount that the rental company’s insurance will insist that the renter pays as the ‘first part’ of any claim. The excess is usually outlined clearly in the insurance documents and the amounts can be high – typically between 500 and 1500 pounds. It works simply – if there is 600 pounds excess and there is damage to the vehicle that costs 1000 pounds, then renter will have 600 pounds extra charged to their credit card. If the damage costs 350 pounds then the renter will need to pay it all.
Purchasing additional ‘top-up’ insurance from the rental company can reduce the excess on a basic CDW policy. Although this may also offer cover for excluded parts of the vehicle, in general such ‘top-up’ insurance is considerably more expensive than similar cover purchased directly online from a specialist insurance company or broker.
These companies sell daily or annual CDW cover policies. They are usually very significantly cheaper than those offered by the rental companies. The policies work by reimbursing the policyholder for any extra amounts they may have had to pay to the rental company for excess or damage to excluded areas of the rented vehicle.
As the direct insurance companies sell their policies to a policyholder rather than a single hire car arrangement, they will cover all vehicles rented during the period although some specialist vehicle categories such as sports cars or high value vehicles over 100,000 pounds in value may be excluded. They offer various CDW products that are tailored to the renter’s needs by country or region. The flexibility and cost savings could be large and it is worth considering further for those that are looking to save money and reduce risks.
Tags: CDW