Rental car excess insurance

Much like the insurance excess on your own car, a hire car excess is the amount a car rental company charges you in the event of an accident or if your rental vehicle is damaged. It helps the rental company cover some of the costs of repairing or replacing the damaged vehicle.

Car hire companies typically recommend you pay a car hire excess reduction fee, which is added to the cost of renting out the vehicle. The excess reduction fee lowers the cost of the excess (should you need to pay it) and is calculated in your daily rental fees.

So, if you were to rent a car and something happened to it (e.g. a large scratch, theft, accident), you would pay a reduced excess (providing you comply with the terms of your rental agreement). Depending on the car rental company, paying excess reduction could mean the difference between paying thousands of dollars in excess or just a few hundred. Keep in mind, small scratches (e.g. 2cm or less) typically don’t lead to a claim as light damage falls under the rental company’s fair wear and tear policy.

The collision damage waiver (also known as a loss damage waiver) is the agreement form you sign with the hire car company where you agree to the terms and conditions of hiring the vehicle. As long as you follow the terms and conditions, you’ll typically be covered for:

• Damage costs for the hire vehicle over the excess amount (you need to pay the excess)
• Damage to other people’s property and vehicles
• Injuries to other people.

The conditions of the collision waiver mean you typically won’t be covered for:

• Overhead or undercarriage damage
• Tyre and wheel damage
• Headlight damage
• Windscreen damage
• Breaches of the rental agreement
• Single vehicle accidents
• Water damage
• Using the wrong fuel
• Damage caused by an unauthorised driver
• Driving in prohibited or restricted areas.

Read through the full details of the waiver to understand your obligations while you hire the vehicle. Some things that aren’t covered, like windscreen damage, may be covered by your travel insurance.

Most comprehensive travel insurance policies (both domestic and international) cover car hire excess either automatically or for an additional premium. However, keep in mind that there’ll likely be a limit on how much your travel insurer will pay towards the hire car excess, and these limits can vary by insurer.

If your policy does include car hire excess insurance (also known as rental vehicle excess insurance), you may not need to pay the excess reduction fee to the rental company when you hire the car, and you’ll be covered for the excess payment as well up to the limit of your policy.

Some insurers may even offer cover for the transportation of your vehicle to its nearest rental depot if you’re unable to drive it there yourself due to illness or an injury. In these cases, you would typically need written communication from an attending medical advisor.

When driving in other countries, it’s also important to check whether you require an international driver’s licence (IDL) or just your Australian licence. Some insurance companies won’t pay out on vehicle-related claims if you don’t have an IDL, so it’s worth checking this before you leave.

Whether car hire insurance is worth it will depend on your circumstances. If you’re driving your rental car and have an accident, it can be a relief not having to worry about the excess payment.

However, remember that your car hire excess cover won’t cover any medical costs relating to an accident. To be covered for hospital or medical expenses overseas, you will probably need to purchase a travel insurance policy that includes medical cover.

The cost of car hire excess insurance will depend on your insurer and whether you combine it with your travel insurance policy. Purchasing a comprehensive policy that automatically includes car hire excess cover may offer better value as this offers cover for more than just your excess.

Various types of travel insurance can include hire car excess cover as standard, including single and multi-trip policies, while some may offer it as an optional extra. It’s a good idea to check the policy wording in the PDS of any insurance product, so you can understand what your policy covers.

As is the case with all types of insurance, there are scenarios where your hire car’s excess might not be covered by your insurer (whether your travel policy or the rental company’s). These can include:

• Disobeying road rules or contravening any law
• Driving under the influence of alcohol or drugs
• Using the incorrect fuel type
• Driving on unsealed roads
• Driving in prohibited areas and within prohibited times
• Driving without a valid license
• Driving a type of rental vehicle that isn’t covered (e.g. motorcycles, mopeds, golf buggies, scooters)
• If you didn’t hire your rental from a licensed motor vehicle rental company
• If the driver of your rental wasn’t listed on the rental vehicle agreement when an incident occurred.

Another thing to consider is that some kinds of damage might also be excluded from your cover. Examples of such exclusions include:

• Windscreens
• Damage to the roof
• Damage to the underbody
• Damage to the tyres
• Damage caused by hitting animals at dawn or dusk
• Any damage arising out of negligence.

If your travel insurance covers hire car excess, you might find that you’re also restricted by the policy’s general exclusions.

Some hire car companies may offer rental vehicle excess cover themselves.

Generally speaking, the better option may be to use comprehensive travel insurance with car hire excess included rather than paying for rental vehicle excess insurance or excess reduction fees with the rental company. This is because you’d likely be buying travel insurance anyway, and you’ll be covered for more events, giving you better value for money than a hire company’s excess insurance.

You may need to pay the rental car company excess upfront with your credit card at the rental desk before claiming with your insurer. It’s always wise to contact your insurer to advise them of your intention to claim. Most insurers will allow you to claim through the online customer portal, via phone or by posting your claim. You will need to supply documentation (like invoices from the rental company) with your claim.

After submitting your claim and being assessed by your insurer, you’ll receive reimbursement if your claim is accepted up to the limit of your policy.

Typically, your car hire excess cover through your travel insurance policy is only for cars. In addition to sedans, SUVs, station wagons, hatchbacks and coupes, some policies may also extend cover to:

• Motorhomes
• Mini-buses/people movers
• Four-wheel drives
• Campervans.

There is also usually a vehicle weight limit; for example, your insurer might not cover the excess for a hired vehicle over 4.5 tonnes.

Be sure to check your PDS if you want to hire a different kind of vehicle.