Check out your own car insurance before paying for waivers when renting a car


If you are planning to rent a car, you might be smart to do little homework before you get to the rental counter.

The agent will ask if you want to purchase a Collision Damage Waiver or a Loss Damage Waiver, which protects you from paying a high deductible or full value if the car is damaged or stolen.

A CDW or LDW is not insurance: It is a waiver of the rental company's right to charge you for repairs or replacement.

That extra coverage can be costly. CDWs and LDWs range from $5 to $14 per day, depending on the state in which the car is rented.

Before taking such coverage, renters should find out if their personal or company auto insurance policies cover them when driving a rental car. About 60 percent of auto insurance companies provide such coverage, according to Harvey Seymour of the New York-based Insurance Information Institute. Others limit coverage to cars owned by the insured or stipulate that the policy covers rentals for no more than, say, 28 days a year.

You can also circumvent paying for CDW coverage by charging therental car on certain credit cards. American Express, MasterCard Gold and Visa Gold are among those that include free CDW coverage.

But if you are not covered by personal insurance or a credit card, Mr. Seymour advises that "it's probably better to purchase the CDW to be safe. The rental car companies can get to be kind of belligerent."

Often, says a Los Angeles representative of a mid-size rental company, customers will take the CDW because they don't want to risk having their personal car insurance increased or canceled.

If you don't want to use your personal auto insurance but still want added collision protection, you might want to check with insurance companies or travel companies that sell less expensive, short-term insurance.

Travel Guard, a company in Stevens Point, Wis., has several such plans, among them an eight-day policy for coverage of up to $25,000 if you damage the rental car. That policy costs $19 and includes other benefits, such as trip cancellation and baggage loss.

Car rental representatives are supposed to explain CDWs and LDWs and tell consumers they are optional. But, industry analysts say, such disclosures aren't always given.

In fact, waiver abuses by rental car firms have become so bad that "there needs to be reform," says Robert Hunter, president of the National Insurance Consumer Association in Alexandria, Va. "We have to eliminate it or regulate it."

Car rental companies do not purchase added insurance for CDW coverage because they already carry insurance on their fleets. The companies keep the money and gamble that renters won't wreck the cars.

It is a sizable amount of revenue for the companies, according to a study two years ago for Hertz, the world's largest car rental company. The survey estimated that U.S. companies collected $600 million a year through CDWs and LDWs, but paid out only $250 million for repair.

"It used to be a pretty simple decision" to get CDW coverage or not, says Mr. Hunter, explaining that CDW coverage was introduced by rental car companies in the mid-1960s. "In the old days, they charged you $3 or $4 for a $500 deductible. Now they're charging a lot more and raising the deductible, or they have no deductible at all. That puts a lot of pressure on the consumer, if he's responsible for the price of a car. But $9 a day is too much just for collision insurance. Nobody would buy insurance if it was $9 a day for 365 days. That's $3,285 a year."

Many consumer organizations, state attorneys general, insurance groups and even some car rental companies support federal legislation that would prohibit the sale of CDWs and LDWs and make car rental companies liable for damage to their vehicles in most circumstances. Exceptions would include if the renter was driving while drunk or under the influence of drugs.

"The sale of CDWs is so prone to abuse and confusion that it merits special treatment to protect consumers," says William McCartney, Nebraska insurance director and vice president of the National Association of Insurance Commissioners.

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