A loss damage waiver, also called a collision damage waiver, is a form of insurance offered by car rental companies to customers when they rent a vehicle. The purpose of a loss damage waiver is to release the renter from any liability in the event the vehicle is stolen or damaged while the renter is responsible for the vehicle. A renter is generally not required to accept the loss damage waiver but should consider the possible consequences if he or she declines the option.
When a renter reserves a vehicle through a car rental agency, there are a number of additional options available that he or she may add on to the rental. The base rate per day to rent a vehicle may not include any insurance coverage of any kind. As a result, rental car companies offer differing levels of insurance to renters to cover mechanical breakdowns, theft, collision, or other losses that could occur. If a renter does not want to be held liable for any damage that occurs to the vehicle itself, then a loss damage waiver is a good choice. Additional coverage options often include liability insurance coverage or towing coverage.
It is important for the renter to understand the extent of the coverage provided under a loss damage waiver. If he or she is involved in a collision and is ultimately found to be at fault, he or she will still be held personally liable for any personal or property damage that results. Coverage for personal or property damage, other than the rental vehicle, would be covered in a liability coverage option. The different coverage options can often be confusing and the renter should pay close attention when selecting the coverage and signing the LDW to be certain the coverage paid for is the coverage needed.
A renter should check with his or her own insurance company prior to deciding whether to accept or decline the waiver option. Many renters make the mistake of assuming that the liability insurance coverage they have in effect for their personal or company vehicle will also cover any loss or damage to a rental vehicle. Some policies will cover a rental vehicle for loss or damage, but not all. Those that do provide coverage to rental vehicles may have limitations on the coverage. In particular, most liability insurance policies will not cover a rental vehicle if the car is rented in a foreign country.