What Is a Collision Damage Waiver (CDW)? Definition and Coverage

What Is a Collision Damage Waiver?

Car rental agencies offer an optional collision damage waiver (CDW), which helps pay for damage to the rented car. This waiver is sometimes called a Loss Damage Waiver (LDW) or Physical Damage Waiver. The waiver’s cost depends on various factors, including the rental car type and where the vehicle is being driven.

Learn more about what a CDW does and doesn’t cover, how your insurance or credit cards may already protect you, and whether it’s worth getting.

How Does a Collision Damage Waiver Work?

A car rental company will typically offer a collision damage waiver when you reserve the automobile or pick up the rental car at the counter. If you choose not to get CDW, you must explicitly decline the optional coverage.

If you want to purchase a collision damage waiver, you’ll pay an additional daily fee on top of the rental car fee. The fee amount can depend on the car’s cost—for example, you may pay more per day for a very expensive vehicle.

With the waiver, if the car is damaged, the agency waives its fees for repairing the car and any loss of use charges that add up while the rental vehicle undergoes repairs.

Some agencies offer a partial damage waiver or a damage waiver with a deductible. These coverages cost less, but also only partially pay for any damages.

If you’re in an accident with your rental car, you must promptly report the incident to the agency and, if necessary, to law enforcement. The car agency then picks up qualifying repair costs, and the incident isn’t reported to your insurance company—unless you were at fault in the accident or the agency says the damage or cause is excluded.  

What Does a Collision Damage Waiver Cover? 

A collision damage waiver typically covers losses from any damage to a rental car while in your possession. For example, if you drive around town and get into a fender bender, you won’t have to pay anything out of pocket for repairs.

A CDW will usually also cover the following types of car damage:

• Accident
• Vandalization
• Theft
• Fire 
• Weather-related damage

The coverage also includes any damage to the car while parked, and accident-related towing. Rental agency coverage will typically also cover the agency’s administrative fees and any daily lost revenue due to the vehicle being out of rotation (also called loss of use).

In some cases, however, you must purchase a separate theft protection plan to cover car theft. In other cases, state law may say you’re not responsible for theft or you’re only liable for a limited amount of vandalism- or theft-related causes, even if you didn’t buy any protection at all.

What Collision Damage Waiver Does Not Cover

Collision Damage Waivers won’t cover:

• Damage to other cars
• Bodily injury to other people 
• Injuries to you or your passengers
• Theft or damage of your personal items in the vehicle

Depending on the state where you’re renting the car, liability coverage (damage to other people or their vehicles) may be included in your rate or it may only kick in after the liability coverage through your personal insurance has been exhausted. Your personal auto policy or health insurance can also help cover you for injuries, while your homeowners policy may cover theft.

Depending on where you’re renting the vehicle, the CDW may not cover interior damage to the car; lost, damaged or stolen keys or devices; or it may contain other exclusions. With some rental companies, a CDW excludes damage to the windshield, tires, and mirrors. Though these incidents may not be as serious, they are more common, and costs can increase quickly.

Waivers typically contain numerous exclusions that will lead to a breach of the rental agreement, in which case the CDW will not cover damage costs. These exclusions may be decided by your state and will be listed in your contract. Typical exclusions include:

• Using a cellphone while driving 
• Allowing non-authorized drivers to drive
• Driving into Mexico
• Driving recklessly or with risky behaviors, such as racing
• Taking the rental car off-road (onto gravel roads or on beaches)
• Participating in an activity that could be criminal (even if you weren’t charged)
• Operating the vehicle while under the influence of alcohol or any controlled substance
• Car theft resulting from not removing the keys or key fobs or closing and locking doors and windows

How Much Does a Collision Damage Waiver Cost?

Collision damage waivers are not expensive, but renting for a few days can increase your total cost by $100 or more.

Pricing varies depending on the rental company, location or state you’re renting, the vehicle type, and other factors. To give you an idea, we collected quotes from three rental car providers across three locations for an economy car in June 2023. We found the cost to average between $25 and $35 per day, rounded to the nearest dollar:

However, you may pay far more when renting more expensive vehicles, such as luxury cars. 

Should You Get a Collision Damage Waiver?

Deciding whether or not to get collision damage waiver depends on your coverage needs and risk tolerance. Declining the coverage may make you feel uneasy, especially if the representative at the rental counter makes the case that you could be taking a huge risk by not springing for the add-on.

However, a CDW may be unnecessary if you carry adequate coverage through another source, commonly your car insurance or credit card.

Your Personal Car Insurance

If you have collision auto insurance on your personal vehicle, you likely have similar coverage when renting a car. These coverages protect any vehicle you’re driving, no matter who is at fault in an accident.

However, your car insurance may not cover loss of use when the car is repaired, towing fees, or any of the rental company’s administrative expenses. Your insurance policy may only cover you up to a certain number of days, such as 30 days. Always call your insurance representative to find out how your coverage works when renting a car.

A CDW can reduce the risk of an incident being reported to your insurance and help you avoid paying your insurance’s deductible if you damage the car.  However, a credit card with secondary coverage can also cover the deductible.

Your Credit Card

Some credit card companies offer coverage for cardholders who use their credit card for the full rental cost of the vehicle. There are two different types of rental car protection provided by card issuers.

Secondary rental car coverage: This is the most common type of coverage, and it picks up the deductible or other potential costs beyond what your auto policy covers. In some cases (if you don’t have a personal auto policy or you’re renting overseas), secondary rental car insurance becomes primary.

Primary rental car coverage: This benefit is found only on some premium credit cards. If you get into an accident or there is some sort of rental car damage, you don’t have to file a claim with your auto insurance—your credit card covers the costs up to the car’s value or a fairly high limit.

Credit cards with rental car insurance include Capital One Venture X Rewards, many Chase Sapphire, United, and Ink cards, and American Express Premium Car Rental Protection plans, which you can add for each rental. 

Bottom Line

Deciding if a Collision Damage Waiver is worth it depends on your coverage and how much you value the benefit of adding a layer of protection. If you don’t have personal auto insurance or a credit card with coverage, then you should seriously consider paying for a CDW. What’s most important is that you take the time to understand your coverage options and their limitations so you can make an educated decision.