CDW is a much cheaper benefit to offer customers compared to liability insurance for a rental car (LIS). That's why it's often included in premium credit card benefits.
What is Collision Damage Waiver for a rental car?
CDW pays to fix a rental car if you are involved in a crash, and it will often cover theft and weather-related damage as well. Usually, you'll be responsible for a deductible of $500 or $1000 and the rental company will pay the rest.
If you have your own car insurance, CDW is similar to collision coverage (and sometimes comprehensive coverage, too). And, in fact, for a short-term rental, any collision coverage you have on your own car will usually also be valid for your rental car.
How are you insured?
CDW has two advantages over using your own car insurance, though. One is that if you're in a crash and have CDW, the claim typically won't be reported to your car insurance company, which can cause your rates to go up. The second is that the rental car company may charge you for the rental fees they are not making while they are fixing the car. Your own car insurance usually won't pay these fees, but CDW generally will.
You can buy CDW at the rental car counter or through a third-party rental car insurance company, or get it as a benefit for a premium credit card. Just make sure you check all the rules associated with your credit card program before you book. You'll need to pay with that credit card, and there may be exceptions to the coverage, like if you rent a luxury car.
What is Liability Insurance Supplement for a rental car?
LIS covers you if you are legally responsible for injuring someone or damaging their car in a crash. You are required to have third-party liability coverage to drive in the United States. LIS is simply the flavor of liability coverage that rental car companies sell, usually by the day.
Your third-party liability protection can come from a few sources: your own car insurance policy (as long as you are renting a car for a short period of time and you're driving in the US or Canada), LIS that you buy at the rental car counter, or a rental car policy you buy from a third party rental car insurance company.
LIS is almost never included in premium credit card benefits even if your credit card offers CDW coverage.
Why is CDW often included in credit card benefits, but not LIS?
The short answer is that CDW is a much cheaper benefit to offer. The maximum payout for a claim under CDW is the value of the car, plus maybe the lost fees while the car is under repair. If there's more damage than the car is worth, it'll just be totaled.
The maximum payout under LIS is the limit on the policy. Because LIS is designed to work for most people, the limits are often $300,000 to $1M per accident. An accident with major injuries will not only cost a lot more to settle than damage to a rental car, but the litigation on it can take years.
Rental car damage is common, but it's usually inexpensive. Even though car accidents with injuries are less common, they are unpredictable and can be very expensive. Plus, most people who rent cars also have their own car insurance, which provides liability coverage. LIS would be an expensive and duplicative add-on to a premium credit card benefits package, so that's why it's not commonly offered.
How do I know if my credit card includes CDW?
You should check your specific card's benefits online or give the credit card company a call. You'll need to pay for the rental with the card with CDW. You should also note any restrictions on the coverage, like whether it applies overseas, if it covers a luxury car, and whether there's a time limit on the length of your rental.
If my credit card has CDW, should I buy LIS at the rental car counter?
If you don't have your own car insurance or you're not sure it covers your rental car, yes you should. LIS usually costs about $30 a day, and it prevents the catastrophic situation where you'd be personally responsible for another car's passengers' injuries after a crash.
Your credit card offering CDW is a red herring; credit cards almost never provide LIS coverage.
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