DEFINITION of 'Collision Damage Waiver (CDW)'

Additional insurance coverage offered to an individual renting an automobile. A collision damage waiver, or CDW, is optional, with the cost of the waiver dependent on a variety of factors, including the type of rental car and where the car is being driven. The waiver typically covers losses from the theft of or damage to a rental car, but is unlikely to cover bodily injury caused by an accident.

BREAKING DOWN 'Collision Damage Waiver (CDW)'

Renters that purchase a collision damage waiver pay an additional daily fee on top of the rental car fee. The CDW provides a level of protection for the renter that covers damage to the rental car. If the car is damaged then the renter is not responsible for some or all repairs, as well as for any loss of use fees that may accrue while the rental car is being repaired.

Collision damage waivers are often offered by car rental companies on several occasions during the rental process. Renters are typically offered a CDW when they reserve the automobile, as well as during the process of picking up the rental car. In most cases the renter has to specifically indicate that he or she is declining the optional coverage.

Credit card companies may offer CDW for cardholders that use their credit card to rent a car. Depending on the terms and conditions of the credit card policy, CDW offered by the company may be considered in addition to or supplemental to any other insurance that the renter may have, such as a regular automobile insurance policy.

Insurance requirements that have to be met by car renters varies by state and by country. In some cases, the renter can decline CDW coverage while not being required to provide proof of other insurance, such as from a credit card or with an automobile insurance policy. In other cases the renter may be required to purchase the collision damage waiver if he or she cannot prove an alternative form of insurance coverage.

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