Written by Nikki Solano

Nikki is the CEO of Pura Vida! eh? Inc. (Costa Rica Discounts), and the author of the guidebooks Moon Costa Rica (2019, 2021, 2023, and 2025 editions) and Moon Best of Costa Rica (2022 edition) from Moon Travel Guides. Together with her Costa Rican husband, Ricky, she operates the Costa Rica Travel Blog, created the online community DIY Costa Rica, built the Costa Rica Destination Tool, oversees the brand-new (summer 2023) Costa Rica Travel Shop, and designed the Costa Rica Trip Planning 101 E-Course. Also, Nikki wrote the Costa Rica cover feature for Wanderlust Magazine's sustainability-focused Travel Green List issue, showcased Costa Rica destinations and experiences on Rick Steves' Monday Night Travel show and podcast/radio show, and served as the Costa Rica Destination Editor for Essentialist, a luxury travel brand. Want to show your appreciation for her free article below? Thank Nikki here. ❤️️

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Costa Rica car rental insurance: What is mandatory insurance?

First things first, take an aspirin. It will help curb the inevitable headache you’re about to get. 😉

Second, know that there are a variety of car insurance types and terms used in Costa Rica, including SLI insurance, TPL insurance, CDW insurance, LDW insurance, and optional insurances including zero-deductible insurance and full insurance. We address all of them in our article below.

SLI insurance and  TPL insurance

SLI insurance and TPL insurance are two types of Costa Rica car rental insurance. They represent different acronyms for virtually the same kind of policy. Both SLI insurance and TPL insurance provide coverage for damage and harm caused to others, so if you’re in a car accident, you’ll have protection for the other driver and his or her vehicle. For this reason, you may see the insurance types referred to as third-party insurance. Third-party insurance (either SLI insurance or TPL insurance, not both) is mandatory in Costa Rica and can be purchased through most domestic car rental agencies.

There’s another type of insurance (which is technically a waiver, not insurance) that’s mandatory to have in Costa Rica but doesn’t need to be purchased from a Costa Rican supplier. Many car rental agencies will allow you to rent a car in Costa Rica without purchasing this insurance through them provided you can supply proof that you purchased the coverage type at home.

CDW insurance and LDW insurance

CDW insurance and LDW insurance, though their definitions vary across car rental agencies, generally refer to the combination of third-party insurance (either SLI insurance or TPL insurance) and the type of insurance you can obtain from home. Together, the two-part CDW insurance or LDW insurance represents “mandatory insurance” in Costa Rica, even though only one part (SLI insurance or TPL insurance) is required to be purchased inside the country.

If you wish to supply proof of car rental insurance from home in order to avoid paying part of Costa Rica’s mandatory car rental insurance, you’ll need to have your preferred car rental agency confirm what kind of paperwork they need to receive from you. Typically, it’s a signed letter from your home insurance provider (or credit card provider, if you plan to use credit card insurance coverage) that confirms the extent of your coverage and its validity period.

Optional insurances

Also available for purchase in Costa Rica are additional insurance policies that can lower your deductible and extend your coverage. While they’re a good idea (Ricky and I usually opt for full insurance), they’re 100% optional.

To sum up…

• If you plan on providing proof of insurance coverage obtained from home, then this proof, together with SLI or TPL insurance purchased in Costa Rica, fulfills your obligation to meet the “mandatory insurance” requirement.
• If you do not plan on providing proof of insurance coverage obtained from home, then you will need to purchase CDW insurance or LDW insurance in Costa Rica in order to fulfill your obligation to meet the “mandatory insurance” requirement.
• Other insurances, which you may see advertised as zero-deductible insurance or full insurance, are recommended but not mandatory.

Wondering if you should rent a car in Costa Rica or use other transportation to get around? Don’t miss our related blog post:

Renting A Car In Costa Rica: Should You Do It?

The great Costa Rica car rental insurance debate: Should you decline part CDW insurance?

If you’ve decided to rent a car in Costa Rica, and assuming you understand the insurance jargon detailed above, you’re probably wondering whether you should rely on car rental insurance obtained from home (combined with SLI insurance or TPL insurance purchased in Costa Rica) or whether you should just buy CDW insurance (or LDW insurance) outright in Costa Rica and be done with it. The former option, which relies on using some insurance from home, is a process known as declining part CDW insurance.

If we offer you the following two options, which option would you choose if your goal is to spend the least amount of money on a vacation?

1. A 10-day trip to Costa Rica for $1,000.00 at a 5% discount
2. A 10-day trip for $2,000.00 at a 15% discount

The answer is obvious, right? Despite the greater discount percentage provided by the second option, the first option is the least expensive trip overall. We’d much prefer to pay $950.00 ($1,000.00 – $50.00) for the trip than $1,700.00 ($2,000.00 – $300.00). Strangely, travelers who decline part CDW insurance when they rent a car in Costa Rica probably don’t see things the same way we do. Instead, their vision is compromised by the appeal of a “better deal.”

Is it cheaper overall to decline part CDW insurance?

Let’s look at actual prices for car rentals in Costa Rica to answer this question. They can help us prove our point above.

In our example below, we use the Suzuki Vitara GL vehicle with a manual transmission (click here for free access to our Costa Rica car rental discount code), which is the least expensive 4X4 vehicle in our preferred car rental agency’s fleet. The cost of CDW insurance for the vehicle is $18.00 per rental day. As described in the “what is mandatory insurance” section above, the daily insurance cost can be broken down into two parts: one part that’s mandatory to purchase in Costa Rica ($12.00 per rental day) and one part that’s mandatory to have in Costa Rica but doesn’t need to be purchased from a Costa Rican supplier ($6.00 per rental day). If you opt to decline part CDW insurance (the second part described above), the following car rental agency policies apply:

1. The amount for the deposit on hold will be double than normal (the deposit increases fro $750.00 to $5000.00).
2. You have to bring a document on headed paper from your credit card bank as proof for insurance declination: coverage amount, type of vehicles, period of coverage, etc.
3. You lose special offers or discounts so you have to pay the regular car rental price.
4. You have to pay for SLI insurance.
5. It is not possible to decline when renting Nissan Urvan or Frontier vehicles.

Pay special attention to the third point above which is underlined. If you choose to decline part CDW insurance, you also forfeit access to discounted car rental rates. This forces you to choose between the following two options:

1. Rent a car for your trip at a discounted rental rate plus the cost of CDW insurance.
2. Rent a car for your trip at the regular, non-discounted rental rate and decline part CDW insurance.

We asked you this above and we’ll ask it again: which option would you choose if your goal is to spend the least amount of money on a vacation? Would you want the option that appears to be the better deal or the option that saves you the most money overall?

The truth is, if you rent the Suzuki Vitara GL vehicle (manual transmission) for 7 days with CDW insurance, you’ll actually pay less overall than if you opt to decline part CDW insurance. The difference in cost is $156.00 (we use high/dry/summer season pricing in our example). Let’s look at the numbers because it’s mathematics, not us, that can prove this point.

Costa Rica car rental insurance example A: Opting for CDW insurance

Discounted (click here for free access to our Costa Rica car rental discount code) 7-day Suzuki Vitara GL vehicle (manual transmission; high/dry/summer season) rental rate: $252.00
7-day CDW insurance cost ($18.00 per rental day): $126.00
7-day CDW declined savings ($6.00 per rental day): -$0.00
TOTAL CAR RENTAL COST: $378.00

In the above example, by choosing not to decline part CDW insurance (so both mandatory portions of CDW insurance are included in the cost of the car rental reservation and no proof of insurance coverage from home must be provided) you’re able to access significant discounts for car rental rates.

Costa Rica car rental insurance example B: Opting to decline part CDW insurance

Non-discounted, original 7-day Suzuki Vitara GL vehicle (manual transmission; high/dry/summer season) rental rate: $450.00
7-day CDW insurance cost ($18.00 per rental day): $126.00
7-day CDW declined savings ($6.00 per rental day): -$42.00
TOTAL CAR RENTAL COST: $534.00

In the above example, by choosing to decline part CDW insurance (so you pay only the part of mandatory insurance that is required to be purchased in Costa Rica, assuming you can provide proof of additional insurance coverage from home) only part of Costa Rica’s mandatory insurance is included in the cost of the car rental reservation. In return, you forfeit access to significant discounts for car rental rates.

Costa Rica car rental insurance example comparison

Example A (not declining part CDW insurance) total car rental cost: $378.00
Example B (declining part CDW insurance) total car rental cost: $534.00
TOTAL CAR RENTAL COST SAVINGS BY NOT DECLINING PART CDW INSURANCE: $156.00

Although there are some exceptions (sometimes with 1- or 2-day car rentals and/or with non-4X4 car rentals), in nearly every case, the savings earned from accessing discounts for Costa Rica car rental rates are greater than the savings earned from declining part CDW insurance.

Here’s why declining part CDW insurance doesn’t make sense financially or otherwise.

Monetary advantage aside, opting to include CDW insurance (in other words, choosing to not decline part CDW insurance) with a Costa Rica car rental makes more sense. Here’s why.

First, opting to purchase CDW insurance in Costa Rica avoids the hassle of needing to obtain a signed document from your home insurance provider or credit card provider that documents your insurance coverage and policy validity period.

Second, purchasing CDW insurance in Costa Rica provides two separate sources of rental protection. Though double coverage isn’t normally permitted, wouldn’t you still prefer to have coverage provided by two separate sources, such as your home insurance provider or credit card provider and the car rental agency you booked the vehicle through? If it’s not costing you extra to obtain insurance coverage from two places, and especially if you’re saving more money overall by doing so (as demonstrated above), why wouldn’t this option be preferred?

Third, if you opt to purchase CDW insurance in Costa Rica you’ll likely pay a much lower refundable rental deposit. In the case of our preferred vehicle rental agency, you’ll pay a deposit of only $750.00 as opposed to $5,000.00. When you opt to decline part CDW insurance, you also opt to agree to special rental policies, one of which dictates that a higher deposit must be paid. See the “Is it cheaper overall to decline part CDW insurance?” section above for a list of other special rental policies that might apply if you decline part CDW insurance.

Worried about falling victim to a car rental scam in Costa Rica? Protect yourself by reading our related blog post:

How Not To Fall For Costa Rica Car Rental Scams

QUESTION TO COMMENT ON: When it comes to CDW insurance and whether you should decline part of it, we think the best decision here is as clear as a clean, wiped windshield. Do you agree?

Pura vida!

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