There can be large differences in insurance practice between car hire companies and between countries. One area where this may be particularly true is Collision Damage Waiver Insurance or as it is sometimes known, CDW Insurance.
In some countries such as the UK as well as many in Europe, the rented car will have some forms of insurance included in the price. Third party liability covers the driver against injury or damage they cause to other people and their property. As the name suggests, theft insurance protects against criminal removal of the rented vehicle.
Collision damage waiver insurance insures the renter of the vehicle against the costs of repairs to the rented car should it suffer damage in an accident.
In some countries such as the USA, these insurance policies may not be included in the basic rental cost and the renter needs to make their own provisions for insurance. In these cases the car rental company will usually offer their insurance policies to cover the above circumstances.
The insurance sold by car rental companies is usually expensive by the standards of the general insurance market and also may have some fairly significant limitations. In the UK, third party car hire insurance is unlimited in terms of financial cover. In many other countries third party liability cover will be limited to a financial amount that may be totally inadequate given the risks of large court awards following an accident.
The collision damage waiver insurance sold by the rental company may also have shortcomings that may concern some renters. Typically it will not cover the entire rented vehicle, as it will probably exclude the wheels, tyres, roof, windows and undercarriage. These can be expensive to repair if damaged.
Additionally, the policy most probably will carry excess. This is a term used to describe an amount of money that that the car rental company will expect the renter to contribute towards the costs of an accident even if insurance is in place. The excess range is usually between 500 and 1500 pounds.
As a result of these limitations, many renters purchase additional insurance to reduce or eliminate the excess, increase the amount of liability insurance available and to improve the cover of the collision damage waiver insurance to include areas of the vehicle otherwise excluded.
There are usually two options for doing so. The first is to purchase additional ‘top-up’ insurance from the car rental company. This is possible but it may also prove to be a very expensive option as this insurance is also available at a much lower cost from the general insurance companies or brokers.
These companies offer collision damage waiver insurance online, where it can be taken out on a daily or annual basis. It is not only cheaper but also more flexible. That is because it is sold to the policyholder for a period of time and during that period, it will cover any vehicle rented not just a single rental agreement (not including certain specialist vehicles such as sports or expensive vehicles over 100,000 pounds in value).
The collision damage waiver insurance purchased directly from an insurance company will reimburse the renter for any excess they are forced to pay the rental company and it will usually cover the costs of damage to excluded areas of the vehicle. It may be worthwhile considering it further.