Buy the extra car insurance from rental company?

I am renting a car in Germany next month (just bought my IDP today) and contacted my credit card company for their CDW waiver, which basically tells the rental car agency that I have CDW coverage through them. The terms in the credit card company's waiver letter state:

The Loss/Damage Waiver offered by the rental agency must be declined by the cardholder in any state or country except where prohibited by law.

So yes, in my situation, if I were to buy/accept the CDW from the rental car company it would negate the credit card coverage. You credit card may have different terms. They likely have a department that can tell you every detail.

Re-reading your post, you say the rental came with "CDW liability." CDW is one thing. Basic liability is another.

Perhaps your rental agreement comes with basic liability? Whereas CDW would be an extra cost. That is typical, though some countries (such as Italy, where CDW is included by law) have different rules.

CWsocial. The rental agreement states, “basic rental with insurances, CDW, THP”. (Can you also tell me what THP is?) We also bought our IDP.

I bet it is Theft Protection.

Are you a AAA member? They may offer some advice. They may even offer a reduced fee insurance policy that the rental agency will accept. Your regular auto insurance carrier may also have some good advice for you.

Good idea. Yes to AAA.

OK you have an accident. Big damage. You’ve declined the rental CDW depending on your credit card or other coverage. What do you do now? Do you know if your credit card insurance will pay or do you have to pay (for a car!) and then file a claim? I tend to over-insure but when I rent a car in a foreign country I buy the insurance from them. That gives me peace of mind for a relatively small amount of money. The only exception is if I’ve purchased travel insurance that has specific auto coverage.

CDW insurance is simply another profit center for the rental car company--except in Ireland and Italy where the government regulations require renters to purchase it.
In car rentals in North America, CDW purchased is actually secondary to your personal automobile insurance.
In Europe, your personal automobile insurance is null and void. There, CDW coverage is secondary to your credit card coverage IF rental car coverage is included in their list of terms. If your credit card company doesn't provide any rental card coverage, the rental company's CDW is finally primary. But often, the CDW will have a large deductible, and they have your credit card as collateral that they will charge for any loss.
Often, European CDW's will automatically add "personal belongings" coverage to your car rental. That covers personal belongings if they're stolen from the rental car. You have the right to decline such coverage.

It’s worth looking at the credit card’s actual policy, as there are so many variations depending on what card option you have. For example, My Amex classic gold policy states:

Coverage for Theft of or Damage to an eligible Rental Vehicle is activated when:
1. You decline the full collision damage waiver (CDW) or similar option, or pay for a partial collision damage
waiver, offered by the Rental Company

Amex will pay the part not covered by the European rental company insurance. When I called Amex initially I was not told about this clause. The telephone agents were unaware that Amex recognized that most European car rental companies don’t let you decline their basic CDW coverages. Amex will pay the deductible amount owed, and the rental company pays the balance. Haven’t had to test it yet, thankfully.

Don't ask here. Ask your credit card company.