So you’re planning a summer vacation with the family and will be renting a car when you arrive at your destination airport. You’ve done your shopping and received the best deal you could find on a vehicle big enough to carry you and that mountain of luggage that your spouse knows would be lonesome if you left any of it at home.

The clerk at the rental counter offers you the Collision (or Loss) Damage Waiver and suddenly, you begin to question whether you really need this coverage or if you can get by without it? You’re inclined to take your chances… and save your hard-earned money. If you have full coverage on your personal auto policy it is quite likely that your physical damage coverage extends to this rental vehicle. That’s a chance people have taken for years – but recently, many people are no longer taking this chance!

One insurance industry group published a paper awhile back titled “The Top 10 Reasons to Purchase the Rental Car CDW/LDW”. Some of their reasons included Administrative Expenses and Loss of Rents. Who would think the administrative costs would be that high and unless all of their vehicles were rented, you could argue their loss of rents claim.

While it’s true that if your auto policy includes comprehensive and collision coverage, you will likely have coverage for any damage you cause to a rental vehicle – subject to your deductible of course. What most people don’t realize is that their auto policy does not provide coverage in the following situations:

  1. Loss Valuation. The rental agreement holds you responsible for any diminution of value (if the market value of the vehicle is less because it has been in an accident), and
  2. Loss Payment. The rental company could potentially max out your credit card to cover the loss if you’ve had an accident with their vehicle (this could cause you to cut your vacation short!).

For many, these are risks that aren’t worth taking. If you fall into that category, plan to purchase the Collision (or Loss) Damage Waiver next time you’re renting a car.