loss damage waiver (LDW)

Loss damage waiver is an agreement with an auto rental company in which the renter is released from liability for physical damage to the vehicle in exchange for a fee, subject to the terms of the rental agreement or a state statute if one exists.

It is not insurance but a contractual obligation subject to many restrictions. In some contracts, the renter may be able to choose either a full damage waiver or one that holds the renter responsible for damage only over a certain specified amount, sort of an inverse deductible. The rental agreement typically stipulates that purchasing the damage waiver is not mandatory.