What is a collision deductible waiver?

Insurance Q&A: “What is a collision deductible waiver?”

Sadly, studies reveal that as many as 16 out of every 100 drivers are currently uninsured, which doesn’t even scrape the surface of the risk you take every time you get behind the wheel of your car.

You also need to factor in drivers who may be considered “underinsured,” which means they have car insurance…just not enough for particularly nasty accidents they may cause.

So what does this mean to those of us who are actually responsible enough to respect the law and purchase adequate auto insurance coverage? Added costs and risk.

For example, it’s not out of the realm of possibilities for an uninsured motorist to cause an accident that damages your car, forcing you to pay your collision deductible out of your own pocket.

How does the collision deductible waiver help?

A collision deductible is an amount you have to pay before the car insurance company covers the cost. The higher the deductible, the lower the insurance premium. Collision coverage generally covers a collision you cause on public roads, collision with other objects or cars, an accident caused by another driver which involves your vehicle, and your car being damaged in a rollover.

However, collision insurance will not cover you for the injuries of other drivers, theft, and accidental damage (this is covered by comprehensive coverage.

Put simply, a “collision deductible waiver,” often referred to as a “CDW,” will reimburse or waive the auto insurance deductible you’d typically have to pay to repair your car if involved in a not-at-fault collision with an uninsured driver.  Or with a hit-and-run driver.

Collision deductible waivers can save you from paying the cost of your deductible when your vehicle is damaged in an accident in which an uninsured driver is involved.

So if your collision deductible is $500, the CDW would cover the $500 expense you’d normally have to shell out to get your vehicle fixed.  Instead of paying the $500, you’d pay some nominal amount each policy term instead for the CDW.

A collision deductible waiver means you will pay a few extra money each month to save yourself from paying hundreds or thousands of dollars in the event of an accident.

That said, a CDW is only available if you opt to purchase collision coverage.  The good news is it’s typically not very expensive to add collision coverage to an auto policy.

Similar to uninsured motorist coverage, this waiver is designed to protect you from financial loss associated with uninsured drivers.

At the end of the day, your insurer knows that thousands of insurance claims are filed each year by individuals who suffer property damage at the hands of the uninsured.

With a CDW in place, you still file your collision claim against your own policy…you just aren’t on the hook for your policy deductible.

You’ve heard of “adding insult to injury.” The collision deductible waiver spares you the “insult” portion of that old adage.

Your insurer will pay the lesser of the cost of repairs or replacement of your vehicle according to its actual cash value at the time of the loss…without the deductible you’d normally be responsible for if the accident was actually your fault.

Collision deductible waivers are available in many states, but the state regulators define CDW differently in California and Massachusetts. If you pay a collision deductible waiver in Massachusetts, you won’t have to pay your deductible when an identifiable driver causes the accident. In California, if you own collision coverage, you can get a waiver that eliminates your deductible if you’re hit by an uninsured driver, even it’s hit-and-run. If the driver is insured, their liability insurance will pay for the damages.

Moreover, if the accident is hit-and-run, the insurance company won’t waive your deductible in most states.

Note: Collision coverage is one component of the physical damage coverage available on most auto insurance policies. The other coverage type is known as comprehensive coverage (aka “other-than-collision).

A liability-only auto insurance policy would leave you with no option but to pay for the vehicle damage out-of-pocket, whether an auto accident is your fault or not.

Are there any other options?

Yes, there sure are. As discussed above, along with collision insurance, you may consider purchasing uninsured and underinsured motorist liability coverage as part of your auto insurance policy.

There is no need to pay for a collision damage waiver if this coverage is in place at the time of your not-at-fault accident.

You simply file the claim under the uninsured/underinsured motorist coverage on your policy and move on with your life.

However, uninsured motorist property damage coverage may have a small deductible associated with filing an insurance claim, and it’s not available in all states or with all insurers.

For example, Texas has a mandatory $250 deductible for uninsured motorist property damage claims.

This serves to keep us honest, by making us think twice about filing minor claims to have our cars repaired.

No matter what the damage to your car, you’ll be responsible for the first $250! But bodily injury caused by an uninsured motorist doesn’t have a deductible.

Read More: Uninsured Motorist Property Damage

Why uninsured motorist coverage may be the best option?

The collision deductible waiver only pertains to property damage caused by an uninsured motorist. But what if the same uninsured motorist physically injures you? The deductible waiver will not help you one bit!

“But, I’ve got great health insurance.” Good news. It’s certainly recommended that you have health insurance. However, there are deductibles and co-pays that go along with health insurance coverage as well. These gaps may lead to you shelling out serious cash in the event you suffer bodily injury at the hands of an uninsured or underinsured motorist.

Need an example?  Imagine you have a $1,000 deductible as part of your health insurance coverage. On top of that, you are required to pay 20% (and your health insurer pays 80%) of all medical services that exceed your deductible.

Now imagine you suffer a back and neck injury at the hands of an uninsured motorist. Let’s say the total medical expense you incur is $5,000 for emergency care, follow-up doctor visits and pain medication. Here’s what your bill will look like.

You pay the first $1,000 out-of-pocket, leaving $4,000 in outstanding medical bills. Your health insurer is going to cover their 80%, or $3,200. Simple math leaves you on the hook for an additional $800 in expenses…in addition to the $1,000 you already paid.

Your total expenses would be ZERO if you had opted to purchase uninsured motorist coverage! Substitute a $25,000 medical bill (or a $5,000 health insurance deductible) into the example above if you really want to make this point stick and get motivated to purchase the uninsured/underinsured motorist coverage.