Collision Damage Waiver (CDW)

It's the part of the process of renting a car where they try to upsell you. First, they ask if you wouldn't rather have a bigger car. Then they ask if you want satellite radio. Finally, they ask about insurance...by which they mean the collision damage waiver.

The CDW, also known as the loss damage waiver, is additional protection that your rental car company will attempt to sell you. It kicks in if you get in an accident and cause damage to the rental car.

The sales person might refer to it as "insurance," though technically it just waives your responsibility for the damage. The rental company isn't selling you insurance; they are selling you the ability to not have insurance (i.e. their insurance will cover it instead).

Generally speaking, your personal car insurance will cover you in case of a accident (in the U.S. and Canada, at least). So strictly speaking, the CDW isn't necessary. However, if you have a high deductible, are worried about your insurance company jacking up your rates, don't want the hassle of filing a claim if an accident happens, or just plan on driving the rental car really recklessly...signing up for the collision damage waiver might be worth it for you.