A loss damage waiver (LDW) is an agreement by which a third party promises to cover the cost of loss of or damage to a rental vehicle by a renter. It does not constitute insurance coverage and the agreement is not normally offered by an insurance company. It is simply a contract between a renter and the owner of the vehicle being rented.
Loss damage waiver agreements are typically offered by car rental companies to renters. If a renter which has agreed to a loss damage waiver from a rental car company is engaged in an accident with the rental vehicle, or if the vehicle is damaged or stolen, the rental car company covers the costs arising from the incident. If the renter does not agree to a loss damage waiver, then they must cover the costs arising from the incident.
If the rental car company has taken out comprehensive car insurance or collision car insurance for the rental vehicle, a loss damage waiver simply applies to the deductible of the insurance policy held by the rental car company.
In some countries, including Switzerland, rental vehicles are typically covered by both comprehensive and collision car insurance (full casco car insurance). If the rental vehicle is only covered by third-party liability car insurance, a renter could be liable for the full cost of damage or loss to the vehicle if they do not agree to a loss damage waiver. In jurisdictions where liability car insurance is not compulsory (such as New Zealand and South Africa) car rental companies may include a waiver of third-party liability costs in their loss damage waiver agreement.
Depending on the jurisdiction in which a rental car company or branch office operates, a loss damage waiver may cover all losses incurred by renters, or the renter may still be required to cover part of the loss out of their own pocket – similar to an insurance deductible.
A partial loss damage waiver (PDW) is a similar agreement to a loss damage waiver, with the difference that losses are only covered up to a predetermined limit. The renter is required to cover all costs in excess of the amount waived by the PDW agreement.
A theft damage waiver (TDW) only waives the cost of losses incurred through theft. This may be included in a loss damage waiver or offered as a separate ageement.
The term loss damage waiver is often used interchangeably with the term collision damage waiver (CDW). In some cases, the term collision damage waiver (CDW) may be used to specifically denote a waiver of costs resulting from a collision and other costs typically covered by collision car insurance, and the term loss damage waiver (LDW) may be used to specifically denote a waiver of costs resulting from theft and damages for which you are not at fault and other costs typically covered by comprehensive car insurance. The terms are also used in the exact opposite order in some cases.
In Switzerland the terms loss damage waiver and LDW are typically used to denote actual collision and comprehensive insurance for rental cars rather than a simple waiver of financial responsibility, while the term CDW is typically used to denote coverage of the comprehensive and collision insurance deductible of a rental car’s insurance policy. For this reason, it is important for renters to get informed about the exact costs which are waived by an LDW or a CDW agreement.
Both collision damage waivers and loss damage waivers (as these terms are used in Switzerland) are included as complimentary benefits on some Swiss credit cards. In this case, the agreement is between the cardholder and the credit card issuer or a third-party insurance provider which covers the costs of losses when an incident occurs. Credit card issuers typically require cardholders to pay for a car rental using their credit card in order to benefit from their loss damage waiver, but this is not the case with all issuers. As a general rule, benefits included on Swiss credit cards which are titled LDW provide comprehensive and collision car insurance for rental cars, rather than a simple waiver. Benefits entitled CDW cover the cost of comprehensive car insurance deductibles for rental cars. The CDW benefit provided by some Swiss credit cards only applies if the rental vehicle is insured, and only covers the deductible. The exact terms and conditions and costs covered by the waiver vary between credit cards. Reviewing the terms and conditions of the loss damage waiver benefit is recommended.
Some car insurance policies also include coverage for vehicles rented by policyholders. This may cover third-party liability only, or it may include comprehensive car insurance and even collision car insurance. If a renter’s car insurance policy provides insurance coverage for vehicles rented by the policyholder, agreeing to a loss damage waiver may be unnecessary. Here too, it is important that renters review the exact coverage provided by their car insurance policies to determine whether rental vehicles are insured at all, and if so, whether geographical and coverage limitations apply.