What does this form of insurance cover?

This form of insurance is known by the name of collision damage waiver. You may find that theft of the rental car while it is in your possession may be included or not, so always check. This form of insurance may not cover all parts of the vehicle so it may also pay to check what is and is not protected. You may find that exclusions include:

• tyres of the rental vehicle;
• wheels;
• underbody of the vehicle;
• windows of the car.

Any parts of the rental vehicle that are not included in CDW insurance that become damaged, you may be expected to pay for repairs yourself.

Other considerations

Another consideration when taking out CDW insurance with the rental company, collision damage waiver, is the fact that they often add on a large amount of excess. This is the amount that comes out of your pocket before the insurance provider takes over the rest of the claim. It may pay to check this amount as there may be huge costs involved. However the good news is that there is car hire excess insurance you may add on to cover the excess. You may also wish to take out insurance for rental vehicles from a standalone specialist provider of excess insurance as opposed to having cover added in by the rental company.

Very simply, it is a collision damage waiver (hence, CDW) that frees you from an element of liability for the cost of repairs if the hired vehicle is damaged in an accident. It is important to note, however, that such a waiver will typically give you only give you partial indemnity or financial protection. This is because in most instances CDW insurance is limited by:

• the imposition of an excess – meaning that you will continue to be responsible for the first part of any claim under the waiver agreement;
• the exclusion of certain parts of the vehicle from the cover for loss or damage – such exclusions commonly relate to the wheels and tyres, the roof, the underside and the windscreen and other windows of the vehicle.

In other words, CDW is unlikely to give you complete financial protection and freedom from liability in the event of the theft, loss or damage of the hired vehicle.

In the light of these limitations to the collision damage waiver that might be offered as part of your rental agreement – and included in the advertised daily rate of hire – you might also want to consider taking out excess insurance cover (as sold by a number of independent online specialists, for example) that not only specifically protects you against having to pay what can be a particularly expensive excess, but can, in some cases, also extends cover to those parts of the vehicle otherwise uninsured by the CDW insurance.

It’s important to note that emphasis on the “full cost” of any repairs, because:

• a CDW will typically exclude particular areas of the vehicle – commonly the underside, roof, windows and wheels or tyres – for which the hirer remains personally responsible in the event of damage;
• a (often fairly hefty) excess might still apply, despite the so-called waiver. As with many another kind of insurance, the CDW excess is the first part of any claim, borne by the insured party – in this case, you, the hirer of the vehicle; and
• collision damage waivers vary from one rental company to another, from one country to another, and – often – from one category of hire vehicle to another.

An attractive alternative to the rental company’s CDW insurance is purpose-designed cover from an independent car hire excess insurance provider. This can typically also include insurance for any excess applied and is arranged in advance of your holiday or business trip, for a duration either of the relevant number of months, or on an annual basis, to cover multiple trips.

Damage to the car

CDW or collision damage waiver provides cover for damage to the vehicle itself and typically carries an excess.

This means that if the rental car is damaged and repairs are necessary, then you will be responsible for these costs up to the value of the excess, which could be anywhere between £500 and £1600.

The CDW would cover the remainder.

In addition, is it very common for CDW to exclude certain parts of the car from cover, which means that if they were damaged, then you would be responsible for their repair costs.

These areas typically include the windscreen, undercarriage and tyres.

So, although your rental car may come with insurance included in the price, you may find that it still leaves you potentially liable for some fairly significant costs should the rental car be damaged while it is in your care.

Buying some excess insurance to top up the CDW may typically be a sound idea.

Specialists

While it is, of course, possible to buy this top up insurance from the car hire company, there are alternatives.

Specialist car hire insurance companies may typically be able to offer top up CDW insurance at prices which may be more attractive than those offered by the car hire company and cover those excluded car parts at no extra cost.

There’s third party liability cover, which protects you financially if you damage some else’s property or injure them with the hire car.

Then there’s typically a collision damage waiver (CDW) that covers you for damage to the hire car itself. This typically also includes the theft of the car.

Third party cover

If you are hiring a car for use in the UK and certain parts of Europe, then third party liability is likely to be unlimited. This means that if you are sued for damaged, your insurance will cover the costs no matter how high they are.

In some other countries, like the USA, third party liability is likely to be limited which means that potentially only part of the costs would be covered and you would have to fund any shortfall yourself.

In that case, buying Supplemental Liability Insurance (SLI) may typically make sense given the size of potential court awards for damages.

Collision damage waiver

Typical CDW cover tends to carry an excess.

This is the amount of money you would be expected to pay towards any damage to the rental car. Not only that but certain parts of the car may be excluded from CDW cover.

That could mean that you may have to pay significant amounts towards repair costs for the hire car in the event of damage.

You can buy car hire excess insurance to cover yourself against having to pay these charges and you may find that specialist rental car hire insurance companies can offer this excess insurance at prices that may be more cost-effective than those on offer from the car hire companies.

Say you were in a collision with another vehicle, or you hit a brick wall surrounding a property. You are probably able to claim on your rental insurance for the damage caused. Fair enough, but you still have to pay any excess – and this may be a large amount. With CDW insurance to fall back onto, typically you are able to claim on the policy and this typically covers your excess charge for you, or so much of it.

Without CDW insurance, you could find yourself facing unexpected costs in the event of an accident or damage to the vehicle (even damage that was caused while you had left it parked somewhere). With a car hire excess insurance policy behind you, if you make a successful claim, potentially you may only have a small portion to pay towards the excess.