What is collision damage waiver?

What is a collision damage waiver?

Collision damage waiver (CDW) is a type of protection that takes care of your financial responsibility for loss or damage to the rental car you use, as long as you don't break the rental agreement's terms and conditions. While you don't have to pay for the direct damages, the waiver might charge an excess which means you can still be at risk of significant out-of-pocket expenses if things go wrong.

Finder survey: Do Australians understand rental car excess cover?

What does it cover?

Collision damage waiver generally covers the following:

• The cost of damage to your vehicle and damage to third party property above the excess amount
• Accidents where you're not at fault, as long as they believe the third party insurer will pay
• Third party injury, paid for through the vehicle registration fee

What doesn't it include?

Common collision damage waiver exclusions include:

So why do I need rental car excess insurance?

Good question. It's because even though a collision damage waiver will directly cover the cost of any loss or damage, you may still be subject to paying an eye-watering excess. Rental car excess insurance can give you that added protection. Essentially, even if you have CDW, the rental company will still charge you an excess amount if the car suffers loss or damage under your care.

Let's say you crash your rental car while on holiday and it's a write off. The car would cost $50,000 to replace, but thankfully, your CDW means you're not liable to pay that amount. However, the excess amount in your rental agreement is $5,000, which you do have to pay (assuming you don't have rental excess insurance).

If you had a rental car excess insurance policy, you could avoid this cost completely.

Collision damage waivers also include cover for windscreens, tyres, roof, underbody and more. Car rental companies usually also offer rental car excess insurance but it normally costs a lot. Luckily, you can purchase rental car excess insurance in Australia before you head overseas, with cover starting from as little as $2.74 per day.

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International or domestic cover	Eligible driver age	Starting price (Per day)	Cover	Excess	Underwriter
Car hire excess	Both	21-75 years	$9.29 ($0 excess)	From $4,000 to $8,000	No excess	HDI Global Specialty SE - Australia	Get quoteMore info	loading
RACV	Domestic cover only	18-110 years	$2.74 (for $1,000 cover)	From $1,000 to $8,000	Choice of $1,000, $2,000, $3,000 … up to $8,000	Tokio Marine & Nichido Fire Insurance Co., Ltd	More info	loading
Rentalcover.com	Both	19-99 years	$7.58	Up to $100,000	No excess	Asservo Mutual	More info	loading
Tripcover	Both	19-99 years	$11.15	Up to $100,000	No excess	Assetinsure Pty Limited	More info	loading

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Is collision damage waiver the same as excess?

No, for most car hire companies in Australia, a level of standard excess known as collision damage waiter or loss damage waiver (LDW) is already included in the price of most rentals. A collision damage waiver or loss damage waiver protects the company from being severely out of pocket if the car needs to be written off and the customer has no way to compensate for the loss.

Collision damage waivers or loss damage waivers minimises this risk, but you as the customer will still be charged an excess if an accident does occur — usually between $3,000 and $8,000.

"On a skiing holiday in Victoria, my husband backed one of our rental cars into the other and we forked out thousands of dollars in excess. After that, we chose a credit card with rental vehicle excess cover so we wouldn't have to pay extra for collision insurance or face crazy excess amounts. It came in handy when a rock cracked our windscreen on a holiday in Tasmania!"

Pauline Hatch

Writer and mum of three

Where can I get rental car excess insurance?

You can purchase rental car excess insurance by adding it onto your travel insurance policy. Many travel insurers automatically include rental car excess as part of their domestic and international comprehensive travel insurance policies or you will need to purchase it as an optional extra.

Depending on the insurer and policy details, you could get excess coverage for up to $10,000.

But before you sign up for the first policy you see that includes rental car excess coverage, it’s important to weigh up the policy’s overall value and inclusions. Don’t forget to shop around either, as doing your research and comparing policies could also save you a couple of bucks in the long run.

Don't some credit cards come with rental car excess insurance?

Yes, they do.

Many credit cards offer credit card car rental excess insurance as part of the complimentary travel insurance offerings. This applies to car rental excesses in Australia and overseas.

You can find this perk across several major credit card brands, including American Express, any of the Big Four banks, Qantas, Citi, BankSA and more.

There are some limits that apply with complimentary car rental excess insurance. Each brand has their own set of requirements to activate cover and meet the criteria of the type of accidents it covers.

Exclusions and limits also apply to this kind of insurance, as credit card rental car excess policies often exclude damage to tyres, windscreens and the underbody of the car and will only offer coverage up to a certain limit.

Given the wide range of coverage limits across credit card issuers, it's highly recommended to review your card's insurance policy document before activating cover.

What's the difference between collision damage waivers and loss damage waivers?

Most car rental companies consider collision damage waiver and loss damage waiver to be the same thing. In most countries, they come packaged together. However, you often need to purchase them separately in the US and Canada.

For the rental companies that separately define CDW and LDW, CDW provides cover if there's damage to your rental car as a result of an accident while LDW is a combination of CDW and theft protection. That means you'll also be covered for car replacement if your rental car is stolen. CDW also usually excludes windscreen, tyres, interior, undercarriage, roof and side mirror repair. If any of these parts are damaged, you'll likely have to pay the full cost of repairs.

Collision damage waivers/loss damage waivers in other countries: how do they stack up?

While collision damage waiver is included when you use a rental car in Australia, there are several popular holiday destinations where you'll have to pay extra if you want it.

• US. Some rental companies in the US will not include collision damage waiver in their initial fees. It's common for you to be offered CDW at the time of rental for an additional daily charge.
• New Zealand. You will probably find collision damage waiver as an optional add-on with many car rental companies in New Zealand. It can often cost you an additional $20 per day on top of your initial car rental fee.
• UK & Ireland. The majority of UK and Irish car rental companies should include collision or loss damage waiver in their total rental fee.

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FAQs

• What is a loss damage waiver?

  A loss damage waiver is an optional type of protection that waives your financial responsibility for damage to your rental vehicle. It also covers you for loss, meaning if your rental vehicle is stolen, it will cover you for a car replacement, up to certain limits.

• Does LDW/CDW insurance cover third party liability?

  Loss or collision damage waiver does not ordinarily cover third party liability; it only partially covers your rental car.

  It might! Many credit card companies offer complimentary insurance to customers to help cover the cost of upcoming domestic or international travel. However, this insurance may only kick in if certain criteria is met. For example, to activate rental car excess coverage, you may need to book the rental car using your credit card.

  You'll also need to check how much your credit card is willing to cover and the amount you will have to pay if you need to make a claim.

• Is rental car excess cover worth the cost?

  Absolutely. As they say, it's better to be safe than sorry. Regardless of whether you're getting around in Australia or overseas, anything can happen. Purchasing rental car excess insurance can give you peace of mind knowing you'll be covered if there's an accident with your rental car.

  Rental car companies within and outside Australia charge an exorbitant excess amount, which could be well over $5,000. Opting for a rental car excess policy means this expense will be taken care of by your travel insurer.

• What is the average excess on a car rental?

  In Australia, the car rental excesses range from $3,000 to over $5,000, so it's worth shopping around for excess cover, even if you're only travelling in Australia.

Written by

Gary Ross Hunter

Journalist

Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

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Ceyda Erem

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Ceyda Erem is Finder’s senior writer for insurance and has almost 10 years of experience writing about personal finance. Formerly a copywriter for several business and finance clients, Ceyda has written hundreds of articles, guides, blogs and more to ensure Australians stay in the loop about how to best manage their money. She has a Bachelor of Arts, Majoring in Writing from Macquarie University. See full bio

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