Credit Card Collision and Damage Insurance
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One of the added bonuses of a travel rewards credit card, in comparison to some of the other rewards credit cards on the market, is the number of insurance policies it may come with. For example, if you want to rent a car, many travel cards come with collision and damage insurance. What’s covered under the policy can vary from card-to-card, but here’s a quick look at the basics of how collision and damage insurance works.
What is collision and damage insurance?
Collision and damage insurance (also known as collision/loss damage insurance) protects you, the cardholder, in the event that you rent a car that is subsequently damaged or stolen. The insurance applies only to the car itself; it does not cover any damages to other cars, property or people. Insurance for these is known as liability coverage.
Collision and damage insurance only comes into force when a renter declines the collision damage waiver (CDW) offered by the rental car company. The CDW is an optional coverage that renters can buy for an average of $20 per day. Buying CDW coverage means that the rental company waives their right to hold you responsible for any accidental damage to the car.
If you do not purchase the CDW option, the rental company can pursue you for any costs associated with repairing or replacing the car. This is where the credit card’s collision and damage insurance is applicable: it covers you against claims by the rental company.
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What is covered under collision and damage insurance?
Generally speaking, collision and damage insurance will cover any costs associated with repairing a car that is involved in an accident, vandalized or otherwise damaged in some way. In addition, it covers the insured for “loss of use” claims by the rental company. In the event that a rental car is damaged and must be repaired, the rental company suffers a loss because it cannot rent out the automobile until it’s been fixed. The loss of use provision protects the renter from any claims the rental company makes in this regard.
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What is not covered by collision and damage insurance?
Not all instances of loss or damage to the car are covered by collision and damage insurance, such as:
- Accidents or damages caused by an insured person driving under the influence of alcohol or drugs
- Any damage inflicted intentionally on the car by the renter
- Damage to the car when transporting illegal goods
- Any damage suffered during a war, rebellion or civil war
- Car rental periods longer than 48 days
- Damage done to subsequent car rentals while you are still renting the first car. Suppose you rent two cars on vacation and the second is involved in an accident; the insurance will not cover any claims that result.
Additionally, not all kinds of vehicles are covered by the insurance. As a general rule, only cars, minivans and SUVs are covered. Vehicles not covered by collision and damage insurance typically include:
- Motorcycles and motor bikes
- Cargo vans and mini-cargo vans
- Vehicles intended for off-road use
- Trucks and pick-up trucks
- Campers, trailers and recreational vehicles
Finally, collision and damage insurance also tends to exclude cars that are either very expensive to buy or very expensive to repair. These cars include:
- Any vehicle which costs more than $65,000 brand new
- Cars deemed to be exotic, such as Aston Martin, Bentley, Ferrari, Porsche and Rolls Royce
- Antique cars, defined as being over 20 years old
- Cars that were in part handmade or hand-finished
Who is covered by collision and damage insurance?
The primary cardholder (e.g. you) is covered by the insurance, provided you declined the collision damage waiver offered by the rental company. Further, coverage applies to anyone who drives the vehicle with the cardholder’s permission. In both cases, the driver must be legally permitted to operate the car in the jurisdiction in which they are driving.
Importantly, you are only covered if you paid for the car rental in full with your credit card. In the event that you only partially paid using your card, you will not be covered by the collision and damage insurance.
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How to make a collision and damage insurance claim
If your rental car is stolen or in any way damaged, you must call the insurance provider as soon as possible. The insurance coverage usually stipulates that you have to report the incident within 24-48 hours, in order to make a valid claim.
As with any insurance claim, providing the insurer with adequate documentation is necessary. Relevant documentation may include: the rental agreement showing you declined the collision damage waiver, copies of any estimates for repairs, police reports, pictures documenting the damage and any repair charges on your credit card by the rental company.
Without compelling evidence, the provider may decline to make a payment against your claim. In order to receive compensation, you will need to cooperate fully with the insurance company during their investigation of the claim. Finally, you will also need to cooperate in the event that the insurance company sues a third party relating to your claim.
The devil is in the details
On the one hand, purchasing collision damage waiver protection from the rental car company can be expensive, particularly if you’re on a long trip. On the other hand, it does prevent the rental company from holding you responsible for any damages to the car.
Whether you decide to purchase the damage waiver or rely on your credit card’s collision and damage insurance really comes down to exactly what the card covers you for. Be sure to check your card’s existing insurance before deciding to forego the rental company’s waiver. And if your current card does not provide collision and damage insurance, consider getting another card that does.
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