When I rent a car, I ALWAYS buy the loss damage waiver (LDW) from the rental car company. When I’m pricing rental car agencies, I include the cost of the LDW in making a purchasing decision. My reasons are explained in several articles I’ve written on this subject…just search my web site for “rental car” to get a list of articles.
The point I make here is that I buy the LDW from the rental car company itself, not from third parties. For example, I found a great Hawaii vacation package on Expedia that included a rental car. When I booked the trip, I could also buy a “damage waiver” through a business partner of Expedia. These waivers are rarely as comprehensive as the waivers sold by the rental companies themselves.
Most rental car company LDWS cover any loss or damage to the vehicle as long as you don’t violate the rental agreement. Third-party damage waivers, in my experience, are rarely as generous, though their cost is enticing, often less than a third of the ‘real’ LDW charge.
For example, I’m renting a car in New Hampshire in September through Expedia and they offer a “collision damage waiver” for 60% less than Alamo, the rental company. The Alamo LDW is $25/day. The faux LDW costs only $10/day. But what do you get in the way of a damage waiver?
The Expedia product covers collision, theft, and vandalism. That’s it. No comprehensive coverage. There is also an exclusion for diminished value. If I bring a damaged vehicle back to the rental company, they don’t care what caused the damage or whether I’m at fault. I’ll pay the extra $90 that the real thing costs for the duration of the rental. That extra expense is a small percentage of the overall cost of my trip and well worth the piece of mind to me.
The promotion for the Expedia includes a testimonial from “Ms. K” who raved about the claim service. She’s lucky the damage was due to one of the three named perils covered by the product. I know an expert witness who bought one of these third-party damage waivers and thought he was actually buying the real LDW. He discovered that wasn’t the case when he had a wreck. Everything went pretty well except the rental company wanted him to pay $2,500 in diminished value. He ended up going round and round with them for 2-3 months until they settled on $1,500. The real LDW would have cost him less than an extra $50.
Just like insurance policies are not a commodity, neither are rental car damage waivers, credit card programs, or other alternatives to the real deal.
Bill Wilson
Latest posts by Bill Wilson (see all)
- The Invisible But Potentially Catastrophic Homeowners Exclusion That’s Not An Exclusion - September 19, 2023
- Revisiting the Illusory Coverage Assertion Following a Claim Denial - September 19, 2023
- FREE Webcast: How to Survive and Thrive in a Hard Market - August 1, 2023
A large exposure is the revenue lost by the car which the renter us obligated by contract to make good as determined by the car rental company
Hi Bill,
I read your article on Rental Car Damage Waivers. While I agree with you on your analysis, for Commercial Accounts I do not recommend buying the PD Waiver. Rather we obtain this coverage within the commercial auto placement. Rental Car Companies are not regulated and are not Insurance Companies. The rental car contract is also limited in most cases and varies by state. Since I travel frequently, I have a habit of reading these agreements. I rarely find one that is acceptable and the are all different. For example, Sixt Rental Car requires the spouse to be scheduled and Enterprise does not. All of them are voided if the operator is “intoxicated”, not legally intoxicated. To me this language as well as other terms makes the PD waiver unacceptable.
Reasonable. I usually follow a belt and suspenders approach of having auto insurance in place AND the loss damage waiver. As you say, the LDW is usually voided by intoxication, use off paved roads, operation by unauthorized drivers, etc. Most auto policies do not exclude these exposures. On the other hand, most auto policies exclude or limit things like diminished value and loss of use that are covered by the LDW if you don’t otherwise violate the rental agreement. The big one for me is diminished value…I’ve seen assessments of $1,500 – $7,500 and heard of one from a reliable source for $15,000 in an upscale rental situation. All that being said, if you have a business that rents a LOT of cars from the same rental company, you can probably negotiate coverage and price. You make another good point about automatic coverage for spouses…when I price a rental car, I include both the rental and LDW costs AND whether there is a charge if my wife drives the auto. I’ve never understood the logic of why you should pay extra for another driver given that both of you can’t drive the vehicle at the same time. That’s why I usually end up renting from, I believe, Enterprise/Alamo.
Thank You for the response. You write good articles and I enjoy reading them.
One Insurance Nerd to another, of course.
Thanks. My wife loves it when I talk nerdy to her. NOT!