Is a Collision Deductible Waiver Right for You?

Is a Collision Deductible Waiver Right for You?

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Collision deductible waivers save you from paying the cost of a deductible when your vehicle is damaged in an accident in which an uninsured driver is at fault. A deductible is the amount of money you are responsible for paying when you make a claim with your collision insurance.

Known as a CDW for short, a collision deductible waiver means you pay a few extra dollars each month to save yourself hundreds or even thousands of dollars in case of an accident, as deductibles can range from $500 to $2,000. Read on to learn more about this auto insurance product and determine whether you should purchase one.

What is a collision deductible waiver?

A collision deductible waiver saves drivers money if they get into an accident caused by an uninsured driver. If you add it to your policy, your insurer will waive — in other words, remove — the requirement that you pay your deductible when making a claim in these situations.

Imagine driving to the grocery store one morning. You turn the corner and, out of nowhere, a distracted driver crashes into your car.

If that driver is sufficiently insured, their liability coverage will cover the costs of repairs to your car. If, however, the driver is one of the approximately 32 million Americans driving without insurance, they are not in a position to pay for repairs. This forces you to pay the dollar value of your deductible when you make a collision insurance claim.

Collision deductible waivers are designed to address this scenario. By adding a CDW to your insurance policy, you’re essentially buying yourself more peace of mind on the roads. You will pay a little more upfront. In Massachusetts, for instance, it costs an average of $5 each month to add a waiver, though costs range from less than $1 to $12 each month, depending on the insurer.

Collision deductible waiverCost of monthly premiumTotal cost during six-month policy
Yes$1,095$6,570
No$1,090$6,640
Assuming accident with uninsured driver

An additional $30 for a collision deductible waiver during a six-month period is ultimately far less than the additional $100 to $2,000 you would spend to pay your deductible if you were hit by an uninsured driver and didn't have a CDW. In short: A CDW is a way of paying slightly more money now to save even more money down the road in the event of an accident with an uninsured driver.

How Collision Deductible Waivers Work in Massachusetts and California

Collision deductible waivers are available in many states. But in California and Massachusetts, the state’s insurance regulators define what these CDWs mean. In other states, individual insurance companies define the terms of the CDW.

If you purchase a collision deductible waiver in Massachusetts, you will not have to pay your deductible when an identifiable driver causes the accident.

The California deductible waiver differs slightly. If you own collision coverage, you can purchase a waiver that eliminates your deductible if you are hit by an uninsured driver — even if the accident is a hit-and-run. Provided you can identify the driver or the car that hit you and demonstrate that they are at fault, you will not have to use your deductible to pay for repairs. This inclusion of hit-and-run accidents with uninsured drivers distinguishes the California deductible waiver from the collision deductible waivers offered in other states.

Scenarios when a collision deductible waiver will not apply

While collision deductible waivers do offer peace of mind, consumers who purchase them shouldn’t get too comfortable. They only apply in case of an accident with an uninsured driver who is at fault. There are a number of other, similar scenarios in which the collision deductible waiver will not apply and won’t help you pay for repairs on your car:

  • The accident only involves one car. Bump into a fence or slam into a highway divider? You’re out of luck. The collision deductible waiver won’t cover this accident, and you’ll need to pay the deductible yourself.
  • The accident is partly your fault. Was that turn on the way to the grocery store at a no-right-on-red intersection? You may be partially at fault even if the other driver crashed into you. The laws that define fault differ from state to state, but if it is determined that the accident is partly your fault, the insurance company will not waive your deductible and you will be on the hook for the cost of repairs.
  • The accident is no one’s fault. Let’s say the drive to the grocery store occurred during a torrential downpour that caused you and the other driver to hydroplane into each other. Neither of you could have avoided the accident, so neither of you is deemed at fault. Because there is no one at fault, the collision deductible waiver will not apply.
  • The accident is a hit-and-run. Did the other driver pull away after hitting you? It’s a terrible situation, but the insurance company will not waive your deductible for a hit-and-run in most states. Many drivers would attempt to pass off single-car accidents as hit-and-runs so as to avoid paying the deductible. To prevent this kind of deception, insurers only waive deductibles when the at-fault driver is identified.

Should you purchase a collision deductible waiver?

The collision deductible waiver only applies in a small number of circumstances. This might make it difficult for consumers to decide whether they should purchase a collision deductible waiver.

If you are the kind of person who desires peace of mind about unexpected financial costs, then a collision deductible waiver is a good option. For only a few extra dollars, you can drive sure in the knowledge that no matter who hits you — insured or uninsured — you will not have to pay for repairs, as long as the other driver is at fault. If the driver is uninsured and you have to use your own policy to cover the damages, the CDW will eliminate your deductible. If the other driver is insured, their liability coverage will pay for the damages.

Another option is to pay more money upfront to get a lower deductible rather than purchasing a high deductible with a collision deductible waiver. For example, we found decreasing your collision deductible from $1,000 to $500 costs an extra $250 per year. While this makes your policy more expensive, it will also save you $500 whenever you make any collision claim, not just in the specific situations covered under a collision deductible waiver.

Ultimately, collision deductible waivers only apply in limited circumstances. If that limited application is worth a few extra dollars to you, go ahead and make the investment. If not, use other methods to get your deductible down.

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