What Is a Collision Damage Waiver?

Last Updated on December 30, 2025

A collision damage waiver (CDW) (sometimes called a loss damage waiver or LDW) is one of the most common add-ons you’ll see at the rental counter. It can also be one of the most misunderstood.

In simple terms, a CDW is the rental company’s agreement to waive (or limit) what you owe if the rental car is damaged or stolen. It can overlap with rental car insurance coverage you may already have, so it’s worth understanding what you’re paying for before you say yes.

Below is a practical breakdown of what CDW usually covers, what it doesn’t, how it works with your auto policy and credit card, and when it’s actually a smart purchase.

Key Takeaways

• A collision damage waiver (CDW/LDW) is usually a contract waiver—not a full insurance policy—and it mainly protects the rental vehicle if it’s damaged or stolen.
• In the U.S., CDW commonly costs about $10–$30 per day (and can be higher), with pricing based on location, rental company, and vehicle class.
• CDW generally does not cover injuries or damage you cause to other people or vehicles; you still need liability protection from your own policy, the rental’s included minimum coverage, or a supplemental liability option.
• Before buying CDW, confirm whether your personal auto policy and/or credit card already covers rental damage—and what gaps (deductible, loss-of-use fees, exclusions) you might still be exposed to.

What Is a Collision Damage Waiver (CDW)?

A collision damage waiver is an optional protection offered by a rental car company. If you buy it, the rental company typically agrees not to pursue you (or to pursue you less) for certain costs if the rental vehicle is damaged or stolen.

Even though it’s sold next to “insurance” options, a CDW is usually not an insurance policy. It’s a contract waiver between you and the rental company. The exact protection (and exclusions) come from the rental agreement you sign.

CDW vs. LDW: What’s the Difference?

Many companies use the terms interchangeably. Sometimes, LDW is the broader term (damage and theft), while CDW focuses on collision damage. In practice, you should ignore the label and read what the waiver actually covers (damage, theft, towing, fees, exclusions, and whether there’s an “excess” amount you still owe).

How Much Does a Collision Damage Waiver Cost?

CDW pricing depends on the rental company, where you’re renting, and the vehicle class. In the U.S., it’s commonly priced around $10 to $30 per day, and it can be $40+ per day in some locations or for higher-value vehicles.

In general, the more expensive the car is to repair or replace, the more you’ll pay for the waiver—which is similar to how vehicle type impacts insurance costs.

What CDW Typically Covers

A CDW/LDW usually applies to the rental vehicle itself. Depending on the contract, it may cover:

• Damage to the rental car from collisions or other incidents (even if you’re at fault)
• Theft of the rental car, including situations where you’d otherwise wonder whether your auto insurance covers theft
• Towing (often to the nearest repair facility)
• Rental-company fees that may come with a damage claim, such as administrative fees, “loss of use” charges while the vehicle is out of service, and sometimes diminished value (coverage varies a lot here)

Some waivers eliminate your out-of-pocket cost entirely, while others still leave you responsible for an “excess” amount. Also, most waivers require you to follow the rental agreement for coverage to apply.

What CDW Usually Does Not Cover

CDW is not a complete “everything” policy. The biggest gaps are:

1) Liability for injuries or damage you cause to others. A CDW generally does not cover bodily injury liability coverage or property damage liability coverage. If you injure someone or damage another vehicle or property, that’s usually handled by your auto policy, the rental company’s included minimum liability coverage, and/or a supplemental liability policy you buy.

2) Your medical bills and passenger injuries. If there are injuries after a crash, coverage often comes from auto medical coverages, health insurance, or separate rental add-ons—not the CDW. (Here’s how car insurance can pay for medical bills after an accident.)

3) Damage that violates the rental agreement. Common exclusions include using the vehicle off-road, driving on prohibited roads, using the car for certain commercial purposes, allowing an unauthorized driver, or driving illegally.

For example, if you were driving under the influence or driving recklessly, the waiver can be voided—meaning the rental company may hold you responsible for the full cost of the loss.

4) Certain parts of the car (depending on the waiver). Some waivers exclude or limit coverage for common “pain point” items like the windshield, tires, side mirrors, or bumper damage. Always scan the exclusions before you agree to the waiver.

How CDW Works With Your Own Auto Insurance

In many cases, your personal auto policy may extend to rental cars—especially for personal travel. The fastest way to avoid surprises is to confirm exactly what your policy does (and doesn’t) cover: does my auto insurance policy cover rental cars?

Here’s the key point: if you rely on your own policy for rental damage, you may still be responsible for:

• Your deductible
• A claim on your record (which can matter depending on the situation and state laws)
• Fees the rental company charges that your policy might not pay (loss of use, admin fees, diminished value)

If you cause a crash, you may also be thinking about what happens with insurance if you are at fault in an accident—including whether the claim could affect your pricing later. A rental company CDW can sometimes help you avoid filing a damage claim on your own policy altogether.

And if you do file through your policy, it’s possible for premiums to increase for many reasons after a claim. This guide explains some of the most common: top causes of car insurance rate increases.

Credit Cards and Collision Damage Waivers

Many credit cards include rental car damage coverage, but the details matter. In most cases, to use the credit card benefit you must pay for the rental with that card and decline the rental company’s CDW/LDW.

Here’s a deeper look at how these benefits usually work: what your credit card covers when renting a car.

Credit card coverage is often secondary to your auto policy (meaning your auto insurance pays first). Some premium cards offer primary coverage for rental damage, which may let you bypass your auto insurer for the rental vehicle portion of the claim.

Depending on your card and situation, using a credit card benefit may help you avoid paying your car insurance deductible (or get reimbursed for it). But read the benefit guide carefully—cards often have exclusions (vehicle types, countries, rental length, and documentation requirements).

When Buying CDW Can Be Worth It

Paying extra per day for a waiver can feel annoying—until you’re facing a multi-thousand-dollar bill or a complicated claims process. CDW is often worth a serious look if:

• You don’t carry collision and comprehensive on your personal auto policy (or you don’t have a personal auto policy at all)
• Your deductible is high and you’d rather have predictable, upfront cost
• You want to avoid a claim on your personal policy for rental-car damage
• You’re renting a vehicle that’s expensive to repair/replace or you’re driving in an area where minor damage is more likely (tight cities, heavy traffic, unfamiliar roads)
• Your credit card coverage is unclear, excluded, or would be a paperwork headache if you had a loss

When You Can Often Skip CDW

You can often decline the rental company’s CDW if you’ve confirmed all of the following:

• Your auto policy extends to rentals and includes collision and comprehensive
• You’re comfortable paying your deductible if something happens
• You understand (and accept) potential coverage gaps like loss-of-use or admin fees
• You have a credit card benefit that clearly applies to your rental—and you’re willing to follow its requirements

Important: Some locations and rental situations may require you to show proof of insurance, place a larger security deposit, or purchase certain protections if you can’t demonstrate coverage. International rentals can be especially different—basic damage coverage may be bundled into the price, but you may still be responsible for a sizable deductible unless you upgrade.

Quick Checklist Before You Get to the Counter

• Call your insurer and confirm rental coverage, deductibles, and any exclusions
• If using a credit card benefit, confirm it applies to the country/vehicle and whether you must decline CDW
• Ask what the waiver covers: theft, towing, loss of use, admin fees, diminished value, and excluded parts
• Inspect the car carefully, take photos/video at pickup and drop-off, and report damage immediately

FAQs on Collision Damage Waivers (CDW) for Rental Cars

Bottom Line on Collision Damage Waivers

A collision damage waiver can be a smart buy when it meaningfully reduces your financial risk and hassle—especially if you don’t have strong rental coverage through your own policy or credit card, or you want to avoid a claim. But if you’re already protected and comfortable with the deductible and potential fees, CDW can be an unnecessary add-on.

The best move is to check your auto policy and credit card benefits before your trip, so you’re not making a rushed decision at the counter.