The Infamous Add-ons: The Collision Damage Waiver (CDW), also called the Loss Damage Waiver (LDW), is always offered by the car rental company at the time of rental. It covers damage to the rental car if you are involved in an accident. The CDW isn't insurance, and it only covers only damage to the rental car. It doesn't cover property damage or personal injury. If CDW is purchased, the car rental company waives some or all of its right to collect from you for physical damages to the vehicle. Sounds good, but how much is it going to cost? It depends on a few things, including the state in which you rent and the type of rental car. Typically though, it runs anywhere from $9 to $20 per day.

Do you need to spend the extra money on it? It depends. You should take a look at a couple things before deciding, preferably before you even walk through the doors of the car rental company. Your own auto policy may provide coverage for car rental. Call your insurance agent to check before you get to the rental car provider. If your current policy doesn't provide this type of coverage and you will be purchasing a rental car on a regular basis, you may want to talk to your agent about adding it. Another place to check for coverage is your credit card. Some cards provide a car rental collision damage protection service. Ask a representative from your credit card company to see if you are eligible for these services, and if so, what is covered. Often, you would need to charge the rental car on your credit card to take advantage of this benefit. Finally, if your car rental purchase is for work, ask your employer about the CDW. Your employer may have coverage that includes car rental and would make purchase of the CDW unnecessary.

You need to understand all the limitations and exclusions on these policies to make an informed decision about CDW. Be sure to research all of the above options before you go to get your rental car. For example, many credit card programs exclude truck rentals. Well, what are the reasons you should get the CDW when you get a rental car? The obvious reason is when you aren't covered for car rental through any of the above options. There are also some other things to weigh in your decision. The first is "loss of use". This is what a car rental company would charge for losses incurred because it could not make money on a damaged rental car. CDW will pay for this, while in most states, this isn't covered under an auto policy. Check with your insurance agent to see if your state is an exception. If you get stuck with these charges, you'll be paying $6,000 - $12,000 out of your own pocket in the event of an accident. Another factor is up front payment. Some car rental companies want full payment from you immediately in the case of rental car damage. In this case, you have to wait to get reimbursement from your insurance company. This might be too much of a financial burden or inconvenience for some. The final factor is just peace of mind. If $9 to $20 a day relieves your worry over your rental car and allows you to enjoy your vacation more, it's probably worth it. 

Using Your Own Insurance

Save yourself a lot of hassle in your car rental experience by doing three things. First: check your own car insurance policy to see what coverage carries over to rental cars. Second: see if the credit card you are using offers any coverage for renting. And finally: check the options the car rental agency offers in its own policies.  The person you are renting your car from will only know their own car rental agency's policies. It's your responsibility to come to the counter already educated. Insurance studies show about 20% of people renting a car opt for the coverage every time. Another 19% buy on occasion. And the experts add that most of those people don't really need it. If you own a car and have a premium credit card, you may already have enough coverage on your rental car long before you even think of renting. Your personal policy generally includes coverage for accidents, called collision, and coverage against theft, vandalism, animal damages or fires, called comprehensive coverage. If that's the case, your car rental should also be covered. 

Because each insurance policy is different, it's best to consult your agent just to clarify what you might expect in terms of car rental coverage. Many credit cards also cover collision and comprehensive claims for any car rental charged through them. But these policies also vary greatly, and some limit rental car coverage to their premium customers. Each card has its own exclusions, payment limits and other restrictions. So again, it's a matter of checking with the company to find out where car rentals fall in your contract. Be aware that both your personal policy and the card may have restrictions on deductibles. That's why it's important to also know the details of what's available through the car rental agency itself before renting. Policy costs generally range between $7 to $25 a day, depending on the car rental company, the coverage and the type of car you're renting. The contracts typically offer four types of coverage:

*Supplemental Liability Insurance  - provides you with coverage for damage to property and injuries you may cause to others while in the rental car.

*Personal accident Insurance - covers the medical bills for passengers of your rental car and yourself in the event of an accident. That includes accidental death. Careful, car rental companies have firm caps on the coverage. Be sure to call your regular car insurance company, as your insurance policy may already provide coverage for you when driving a rental car.

*Personal effects coverage - pays for items stolen from your car. (It's often combined with personal accident insurance).

*Collision damage waivers - while not really insurance, it generally means you won't be held financially responsible if your rental car is stolen or damaged. The one advantage this has is that it may protect you if your regular insurance disputes a "loss of use" claim by the car rental company since they are unable rent your vehicle while it's being repaired. This is the one where a lack of coverage can really get you. Imagine having to cover the full retail cost of renting that car every day it is out of use.

For each insurance option offered by the car rental agency, you will likely have coverage through either your own car insurance policy or credit card, or both. The key is to educate yourself to what your limits are well before the rental car attendant hands you the keys to your vehicle.