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Credit Card Collision and Damage Insurance

In contrast to some of the other rewards credit cards on the market, one of the additional benefits of a travel rewards credit card is the amount of insurance plans it may include. If you wish to hire a vehicle, for example, many travel cards include collision and damage insurance. What's covered by the policy varies depending on the card, but here's a brief rundown of how collision and damage insurance works.

What is collision and damage insurance?

Collision and damage insurance (also known as collision/loss damage insurance) covers you, the cardholder, if you hire a vehicle and it is later damaged or stolen. The insurance only covers the automobile; it doesn't cover damage to other vehicles, property, or persons. Liability coverage is the name for this kind of insurance.

When a renter rejects the rental vehicle company's collision damage waiver (CDW), collision and damage insurance is activated. The CDW is an optional policy that renters may purchase for $20 per day on average. By purchasing CDW coverage, you are waiving the rental company's right to hold you liable for any unintentional damage to the vehicle.

The rental company may pursue you for any expenses connected with repairing or replacing the vehicle if you do not buy the CDW option. This is where the collision and damage insurance on your credit card comes in handy: it protects you against claims made by the rental business.

What is covered under collision and damage insurance?

Collision and damage insurance, in general, will cover any expenses connected with fixing a vehicle that has been in an accident, vandalized, or otherwise damaged. It also protects the insured against the rental company's "loss of usage" claims. When a rental vehicle is damaged and has to be repaired, the rental business loses money since it can't hire it out until the car is restored. The renter is protected from any claims made by the rental business in this respect by the loss of use clause.

What is not covered by collision and damage insurance?

Collision and damage insurance does not cover all types of vehicle loss or damage, such as:
  • Accidents or property damage caused by an insured individual who is under the influence of alcohol or drugs while driving.
  • Any deliberate damage done to the vehicle by the rental 
  • When carrying illicit items, the vehicle suffers damage.
  • Any loss incurred as a result of a battle, revolt, or civil war.
  • Rental durations of more than 48 days are available.
  • Damage to future vehicle rentals while the original car is still rented. If you hire two vehicles for your trip and one of them is involved in an accident, your insurance will not cover any claims.

Furthermore, the insurance does not cover all types of cars. In general, only automobiles, minivans, and SUVs are insured. The following vehicles are usually not covered by collision and damage insurance:
  • Motorcycles and motor bikes
  • Limousines 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 often excludes vehicles that are either too costly to purchase or fix. Among them are:
  • Any car that is brand new and costs more than $65,000
  • Aston Martin, Bentley, Ferrari, Porsche, and Rolls Royce are examples of exotic automobiles. Over 20-year-old vehicles are classified as antiques.
  • Hand-built or hand-finished automobiles

Who is covered by collision and damage insurance?

If you reject the rental company's collision damage waiver, the main cardholder (e.g. you) is protected by the insurance. Furthermore, anybody who drives the vehicle with the cardholder's consent is covered. The driver must be legally authorized to operate the vehicle in the jurisdiction in which they are driving in both instances.

Importantly, you are only protected if you used your credit card to pay for the vehicle rental in full. You will not be protected by the accident and damage insurance if you only paid partly with your card.

How to make a collision and damage insurance claim

If your rental vehicle is stolen or damaged in any way, you must contact your insurance company right once. In order to file a successful claim, the insurance coverage generally requires you to notify the event within 24-48 hours.

Providing proper paperwork to the insurer is required for every insurance claim. The rental agreement indicating you rejected the collision damage waiver, copies of any repair estimates, police reports, photographs confirming the damage, and any repair costs on your credit card by the rental company are all examples of relevant evidence.

The supplier may refuse to settle your claim if there isn't enough convincing proof. To be eligible for reimbursement, you must fully cooperate with the insurance provider throughout the claim inquiry. Finally, if the insurance company files a lawsuit against a third party as a result of your claim, you must comply.

The devil is in the details

On the one hand, renting a vehicle with collision damage waiver insurance may be costly, especially if you're going on a lengthy journey. It does, however, prohibit the rental company from holding you liable for any damages to the vehicle.

It all boils down to whether you want to buy the damage waiver or depend on your credit card's accident and damage insurance. Before choosing to forgo the rental company's waiver, be sure to verify your card's existing insurance. Also, if your current card doesn't cover collision and damage, try switching to one that does.