Why do credit cards require you to decline CDW...
 

Why do credit cards require you to decline CDW for their car rental insurance to kick in?

I would think they would be better off if your rental is covered, even in part, by the car rental firm?

Any ideas (I haven't found a discussion of this following a good bit of searching)?

The credit card car insurance is INSTEAD of the CDW offered by the car companies. If you accept the CDW, you are no longer covered by your CC insurance.

It is up to you which you choose. The CDW offered by the rental company is expensive and a big profit center for them. The car insurance from your CC is free and included in the benefits is most platinum (and even many Gold) cards. Best to check what is covered by your CC though. Some CC won't cover in certain countries, e.g., Italy, Ireland, and most will not cover exotic cars or long term (> 30 days) rentals.

If you have duplicate insurance in any area of insurance, it can involve years of delays of payments and even the necessity to end up in court to settle who owes what. If you want to be covered by insurance for any category, you need to have one and only one insurer covering that category. A related example would be when you get in a car accident and you are insured, and the doctor refuses your health insurance because it was an auto accident...but the other person's auto insurance company doesn't settle...so you're bankrupt anyway because you're caught between two insurance companies waiting for the other guy to blink. When elephants contend, the grass gets trampled.

Even if the credit card didn't ask you to do this, it would just be good sense. A bank with all its employees and lawyers doesn't want to get in an unnecessary dog fight over duplicate insurance. That should tell you how much of a hassle and an issue it is. So that's why...

I can't be certain, but I think the issue is a slightly different one. (Basing this speculation on my 30 years in the insurance biz.)

Imagine for a moment that you borrow my car, and I agree that if you bang it up, I won't charge you anything. Now imagine also that someone else says that if you bang up my car, he'll pay the cost of the repairs. You could potentially gain by intentionally banging up my car.

I don't think it's necessarily a question of paperwork, more of making sure you can't gain by having an accident.