Pros and Cons of Top 4 Car Rental Insurance Options

Car Rental Company Collision Damage Waiver (CDW)

  • Pros: When you buy this option you are covered for any damage to the rental vehicle without having to make a claim with a credit card or insurance company. You can return the as a wreck and just hand the keys back (provided you wrecked it within the terms and conditions of the rental i.e. not drunk etc)
  • Cons: Rental companies are notorious for charging an arm and a leg for their coverage option, i.e. up to $30-40 a day. 


Auto Insurance Policy with Rental Car Coverage

  • Pros: When using your auto insurance policy to cover your rental car, there are no out of pocket expenses. You can simply tell the rental agent at the pickup desk that you have auto insurance which covers you.
  • Cons: Most auto insurance policies have an a deductible which can be as high as $500-$1500, depending on the policy you have, which can be pretty painful if you have to make a claim. And to add insult to injury, your premium could increase up to 44% if its your first claim. ouch!

Credit Cards as a Rental Car Coverage Option

  • Pros: Similar to auto insurance, with credit cards there are generally no out of pocket expenses. If you have no other primary insurance then credit card rental car insurance can be an affordable way to cover a good portion of the rental car risk.
  • Cons: Unfortunately not a lot of people realize that credit cards are always a secondary source of insurance. In other words, if you have an accident or loss you will still need to claim on your primary auto insurance policy and risk those cons. Additionally, the devil is in the detail when it comes to what is actually covered by credit cards. For example, some cards don't cover hail damage, loss-of-use or tire damage. Buyer beware.


Third Party Car Rental Damage and Supplemental Liability Insurance

  • Pros: Car rental damage insurance offered by companies such as and have several distinct advantage. Firstly, its much more affordable than what the rental company offers, coming in at under $10 a day (or even cheaper if buying the annual car rental insurance policy). There is a zero deductible, up to $45,000 in primary coverage, and covers basically any damage reason or loss (incurred while driving within the rental conditions).
  • Additionally the ability to purchase supplemental liability insurance online (also known as SLI or LIS) is a very convenient option, because you can purchase it along with your damage insurance online, avoiding the hard sale at the rental counter.  
  • Cons: Third-party car rental insurance generally acts as reimbursement insurance. Depending on the amount of damage, you would be charged by the rental company and the insurance company would refund you those charges. Though, if the damage was say over around $3,000, then the rental car company would deal directly with the insurance.