It's about time we got to the bottom of a couple of little abbreviations that have a big impact on your car-hire agreement. It’s important to understand what you’re paying for when you hire a car, not only can this help you save money, but it also means you’ll be confident that you’re compliant, legal and have the cover you require on the roads in the country you’re visiting to give you peace of mind.

We've also made a handy video, to tell you all about these often confusing terms:

CDW (Collision Damage Waiver)

Also known as LDW (Loss Damage Waiver) reduces your liability of the hire vehicle to the amount of excess the car hire company states in their agreement. It’s important to know that it might not cover all types of damage (for example undercarriage, types and windscreen), so you should check this at the car hire desk. Without CDW you may liable for the entire value of the vehicle, but most car hire companies outside the US and Canada will include this. It is also important to understand that CDW only protects the hire car not 3rd party liability, which is covered by supplementary liability insurance (SLI).

Most car hire companies in the UK and across Europe include a basic level of CDW/LDW cover as standard with an Excess (which is normally between £1000 - £3000). If they don’t, they’ll likely expect you to purchase this from them at the time of hire. It’s up to you whether you choose to do this or not, but bear in mind it may be a legal requirement in the country you’re visiting. They will also offer you an optional Excess waiver cover, which for a cost normally around £10 - £30 per day which will then give you cover for the full value of the vehicle.

If you’re visiting the US or Canada (and some other countries as well), you’ll find a lot of rental companies won’t include CDW, and will ask you if you wish to purchase this from them. The rental market in these territories is a bit different and many people choose to get their cover from 3rd party suppliers such as credit-card companies.

ReduceMyExcess covers you for the excess in respect of any damage to or loss of the vehicle that you’re responsible for up to the excess limit stated on your policy with us (£10,000 as at the date of this article). If you are traveling in the US or Canada, Reducemyexcess offers CDW cover up to US $50,000 which will cover you up to this amount, should you chose not to take out the Car Rentals company CDW.

What is SLI?

SLI (Supplemental Liability Insurance)

This is a level of cover that is the equivalent of 3rd party cover. It insures you against injury or property damage to a 3rd party up to the designated limit. It can be called Additional Liability Insurance (ALI). As with CDW, most rental companies include SLI as standard except those in the US and Canada where it must be purchased separately.

ReduceMyExcess doesn’t sell SLI and any costs you incur under SLI isn’t covered by us. Always check your rental agreement to ensure that your liabilities are no greater than the benefits that your policy provides.

In summary, a ReduceMyExcess policy is designed to be an alternative to the car hire company’s Excess Waiver, you may take out the additional CDW cover only for rentals in the US or Canada.