You're at the counter and the car rental agent asks you if you want something called a collision damage waiver, also known (incorrectly) as car rental insurance.
The collision damage waiver (CDW) covers the cost of damages to the rental car if you are involved in an accident. However, it is not insurance -- it is simply a provision of your rental agreement that addresses your liability for damages to the car.
Before you purchase the collision damage waiver (car rental insurance):
Check Your Existing Auto Insurance Policy. Make sure your auto policy includes damages to the rental car under the policy's comprehensive and collision coverage.
Check Your Credit Cards to see if they will pay for damages to a rental car in the event of an accident. To be eligible, you probably would have to decline the collision damage waiver as well as charge the full amount of the rental car on your card.
Some credit card companies have limitations and exclusions on rental car coverage such as from limited rental contracts and approved rental dealers.
The bottom line: If you decline the collision damage waiver after determining your car insurance or credit card company pay for damage to your rental car, keep in mind:
CDW can in some cases double the cost of the rental per day $20-$30 more per day. But this is better than paying
If you aren't covered under your own insurance or credit card then you may consider purchasing the collision damage waiver. It's a better option to pay about $8 to $11 a day than
The collision damage waiver pays for "loss of use." This is what the rental car company charges you for the money and time it lost since the vehicle could not be rented. Most states do not cover loss of use under an auto insurance policy. The exceptions are: Alaska, Connecticut, Louisiana, Minnesota, North Dakota, New York, Rhode Island and Texas.
If an accident, some rental car companies want payment up front, meaning you'll have to wait to be reimbursed from your own insurance company. This can range into the thousands, so some therefore some may just opt to pay the extra price for the collision damage waiver.
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