Car Hire: Excess Insurance

You reach your destination after a long flight and you’re also ready to pick up your rented car. It should be a simple task. But when you get to the front desk of your preferred service provider, you find out that you have to scan your contract thoroughly. You also need to give your car a check for damage while they’re trying to upsell a costly excess waiver policy.

The bait is to agree to everything instantly so you don’t keep the line behind you waiting. But you shouldn’t do so! Car hire excess insurance is an essential extra to be included in any car rental. It can save large sums by purchasing it at home before you set off.

What is car hire excess insurance?

When you try to try to hire a car in Europe, they may sell you Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW). In the United States, though,, you are expected to purchase this cover but it won’t be included in the total rental cost.

These policies may offer a false sense of security, as if you had to claim due to an accident or damage to your vehicle, you would still be liable to pay the initial part of the amount you are claiming for which is called the “excess”.

With car rental agreements, this excess amount varies. In Europe, it normally comes around €500 up to €2,000 (£430 to £1,750), and sometimes it can cost more than what you pay for a rental car.

This is where car hire’s excess insurance comes in as it is there to prevent you from having to pay these hefty excess charges and will give you peace of mind should something go wrong.

When picking up your hire car, you’ll typically be offered different types of services which you must also spend at an extra cost on top of the price of the actual rental car (like breakdown coverage, personal injury coverage, etc).

It can all be a bit complicated and expensive. And what a lot of people don’t understand is that if the hire car is damaged in any way, you are typically responsible for paying the excess. This is often between £500 and £2000, sometimes even higher, depending on the vehicle type and who you’re hiring the car from.  

Car hire excess coverage is a policy that meets the same traits as travel insurance. This requires you to purchase it as a single or annual policy. You may want to consider the annual policy if you hire cars frequently or are hiring a car for more than 14 consecutive days. 

The policy is created to help renters in covering the excesses of up to £10,000.

  • While car hire agreements usually offer some certain level of insurance for your rental, the excess cover could provide you better peace of mind.
  • Car hire excess insurance will also cover you for some of the ‘extras’ charged by the rental company such as damage to tires, underbody damage, and damage to any auto-glass.

But do I really need it?

The short and quick answer is no. You are not required to purchase it.

The only default situation is that if you have an accident while driving your hire car, you are responsible for paying the excess, which costs between £500-£2000. If, however, you’d rather err on the safe side, then car hire excess insurance should be a part of your option. 

With this kind of coverage, you are well-assured that you don’t have to pay in the case of damage that occurred to your hired car which could be considerably expensive.

No one likes to be involved in an accident, and it’s alluring to assume that you won’t incur any because you’re a good driver. But it’s not just your own capability of driving you have to worry about with car hire.

According to iCarhireinsurance, 22% of the claims required dealt with in 2017 were for damage that befell when a vehicle was unattended.

Ben Wooltorton, Chief Operating Officer at iCarhireinsurance clarifies, “Claims made for hire cars being inscribed off or stolen are just a few and far between. What’s really frequent is low-level damage. For instance, noticing that your side mirror is stolen after parking your car outside your hotel in Italy or scratching your car door by opening it onto a cement block in a beach car park.”

These scenarios are very stressful but surely insignificant damage shouldn’t cost much to fix? However, Ben also explains: “There was a lot in the press about mounted fees from rental companies last year, with some repair charges actually arriving at up to £2,000 for minor damage – more than the value of the customer’s holiday. Without purchasing excess protection, customers could be left empty-handed.”

Benefits of Car Hire Excess Insurance

Coverage of Car Rental at Home or Abroad: Hiring a car on your vacation gives you the flexibility to traverse the area at your own freedom. Short-term Car Rental at home may be required while your own vehicle is being repaired, or for occasional use as a component of a car share system.

Whatever your intentions for hiring a car, make sure that you’re not left with a long bill if the vehicle is damaged or robbed whilst in your care.

Easy to arrange insurance to match your demands: If you don’t hire frequently, you can opt for single-hire insurance. Alternatively, if you hire a car two or more times a year, the Annual insurance provides excellent value and year-round peace of mind.

Why pay your Rental firm’s expensive Collision Damage Waiver? Collision Damage Waiver is the one mostly offered by Car Rental companies. What it does is remove or lessen the amount required for a damaged car. This add-on can be pricey and may not incorporate all costs, especially relating to tires, windows, and underbody.

Car hire excess insurance works in place of CDW, at a much cheaper price and incorporating damage to any part of the vehicle

Hiring a car while overseas supplies you with great freedom to traverse your destination. But it can be pricey, particularly when car rental excess insurance is included. Some renters are only offered a collision damage waiver when they pick up their car, a normally expensive charge that can further tighten your budget.

There’s no refuting that a collision damage waiver can provide you extra peace of mind – particularly when driving on foreign roads. But car rental companies frequently impose a hefty price for this vital add-on.

Car Hire Excess Insurance provides you all the assurance you require in the event of a collision, but at an affordable price. Several holidaymakers are now becoming knowledgeable about the high rates charged by some car rental companies for excess coverage. This explains why purchasing separate car hire excess coverage has grown so widespread.

Protection: If damage were created in your rental car or if it’s stolen, you are usually responsible to pay an Excess, or Collision Damage charge. Even if you’re not responsible for the damage, you will still be charged.

How does car hire excess insurance work?

One account, two very different situations: With and without a car hire excess insurance.

If at some point there was an accident in a rental car, the rental company should be the one to take care of the repairs. Such a policy is not called insurance as you’d get for your car. Rather, the car rental firm just doesn’t ask you to spend on the repairs yourself. This is termed a damage waiver.

However, you’re normally asked to pay towards the price of the repairs, which is deemed an excess. Car hire excess insurance incorporates this initial charge for you, possibly saving you up to £2000.

Without car hire excess insurance

You’re on a vacation in France and you’re not used to driving on the right-hand side of the road. You accidentally trim the edge of the road, piercing a tire and damaging paintwork.

This requires £750 to be repaired. Your balance with the car rental firm is £500, so you will have to pay the company £500 and they will cover the remaining £250.

Cost to you: £500.

With car hire excess insurance

You have purchased the Annual Europe policy in anticipation of your holiday in France. You hit the edge of the road, piercing a tire and damaging paintwork. This requires £750 to be repaired.

Your balance with the car rental firm is £500, so you will have to handle £500 and they will spend the remaining £250. However, you then claim car excess insurance and acquire a refund of £500 for your excess.

Cost to you: From £46.99.  

Daily versus annual car hire excess insurance

The key difference between daily and annual car hire excess insurance policies is those daily policies are available up to 60 days at a time. They can also cover your car hire insurance wherever you are in the world. However, keep in mind that you are required to take out a new policy with every car rental agreement.

The annual car hires excess insurance policies, on the other hand, enable you to include your excess for up to 60 days at a time as many times as you like over 12 months.

How much does this cover cost?

As with several travel add-ons, if you purchase car hire excess insurance to the last minute, you could end up spending well over the odds. Considering a waiver agreement out at the rental desk could fetch you as much as £150 a week, says Ben.

But it doesn’t require to be expensive if you shop around. For example, if you purchase an independent car hire excess insurance policy online in advance, it can take as little as £2.99 a day.

If you’re a frequent traveler, an annual policy could save you even more money with rates starting from just £42.99 for European cover.

Do I need to buy additional insurance when renting a car?

Strictly speaking, you are not required to purchase additional insurance when you hire a car.

Any car you hire should come with third-party car insurance as a standard form of coverage. This might seem on the rental agreement as third-party liability coverage.

Your rental agreement should also proceed with a damage waiver, completely covering any damage done to the car you’re using at the time. 

The damage waiver does arrive with an excess, though. So if you’re in an accident, you’d have to spend an initial amount and the rental company would spend for the other costs.

What about CDW?

Most car hire companies around the world incorporate this type of insurance as a standard form of coverage. However, some countries, such as those in North America and Central America do not. It is also becoming frequently popular for car rental companies in Europe not to incorporate this cover.

Are there any other benefits to taking out an independent policy?

According to Ben, 11% of the claims made in iCarhireinsurancereceives are for damages created to tires and windscreens. With countless waivers marketed on every car rental firm’s desk, damage to these weak parts of the vehicle won’t be included. So, an independent policy with this inclusion is of great value.

Is there anything I need to be aware of when it comes to independent excess insurance?

Independent policies operate on a compensation basis. So, if there is any damage done to your rental car, you’d have to spend the rental company the excess fee it requires and then claim this back from your insurance provider.

This means that you are still required to present your rental company with a credit card with adequate funds as a deposit when you pick your hire car up.

Some questionable rental companies may also attempt to convince you that your independent policy isn’t legitimate or recognized by it alone. However, as Ben describes: “A rental company is not required to recognize your insurance as it serves as a reimbursement. We’re reimbursing the customer, not the rental firm. Plus, excess insurance isn’t actually obligatory; a customer can decide not to purchase it at all.”

So, if you are faced with this type of discussion at the rental desk, stand your ground. If your preferred rental provider is being very difficult and saying that its policy specifies that you have to rule its waiver out or nothing, Ben advises to challenge the service provider.

Ask them to put this account in writing for you or say it again while you record it on your mobile phone. You’ll be amazed how immediately they back down.

What to ask the rental agency

When taking rental car excess coverage, you’ll want to ask the rental firm about the following situations:

What’s your responsibility under the rental agreement?

This will help you conclude how much excess coverage you require.

  • What is the rental agency’s official responsibility/excess for the vehicle you are renting? Accountability for luxury vehicles and 4WDs is frequently higher than for standard vehicles.  
  • Are there allowances when your liability may be more expensive than this, such as for single-vehicle accidents, or younger drivers?

What are the exclusions to the cover?

Several rental car agencies’ products won’t cover all scenarios. This is essential, as it means that your obligation may even stretch beyond the standard liability or excess.

It’s also essential to question any third-party excess cover providers if they hold any exclusions with their cover.

Standard exclusions from the rental agency involve damage done to windscreens and tires, overhead and underbody damages, accidents comprising a single vehicle, or damages as a result of a violation of the rental agreement.

What constitutes a violation of the rental agreement? 

It’s fairly conventional, among rental agencies, and alternative third-party providers, to eliminate cover if you’ve violated the rental agreement. Examples involve driving while under the influence of alcohol, driving on rough roads, utilizing an undeclared driver, driving carelessly, or otherwise not following the driving rules. 

Hidden fees

While excess discounted products are more likely to make your hire car bill blow out, there are still extreme numbers of other costs that can add to the price creep.

Keep in mind that any percentage-based surcharges made like administrative charges, added area surcharges, and compulsory taxes such as the GST should be included in your total bill. This can literally add up as they will not only affect the hire costs but to any excess conversion products you obtain as well as other add-ons and expenses such as car seats, GPS, and one-way hire prices.

Some of these expenses and add-ons (some voluntary, some unavoidable) include:

  • Vehicle registration recovery charge: This fee is frequently pinned onto the quote and credited as a set daily rate to obtain the compulsory costs of listing the vehicle.
  • Administrative charge: It’s normal practice among car hire firms to impose an inescapable administrative charge of around 3.5% on top of the entire cost.
  • Premium location tax: Specific locations (such as airports) will frequently have a premium location tax pinned on, which can be quite expensive. For example, Avis imposes a 27% surcharge if you’re hiring from Melbourne airport.
  • Credit card taxes: Car hire companies are allowed to impose a surcharge for card fees, however, they can’t be more expensive than the reasonable price of processing the transaction. The RBA’s guide recommends that payments utilizing Visa or Mastercard may require the business around 1–1.5% of the transaction and 2–3% for other payments with American Express.
  • Admin expenses on tolls: If you’re working with a rental agency’s e-tag system, you’ll typically be taxed by the toll plus an additional daily admin charge. Some car rental companies will let you use your own e-tag while others don’t.
  • Cancellation fees: A cancellation fee will regularly apply if you don’t cancel your booking within a certain period.
  • One-way/relocation expenses: If you want to drop the rental vehicle in another location, you’ll likely be imposed a fee for service. You may also be asked for an extra cost for returning accessories to different locations. For example, Budget imposes a $250 fee (plus admin charges) for its GPS if it’s dropped off in a different location that hasn’t been pre-approved.
  • Additional driver fee: If there is more than one person who wants to drive the car, car rental companies will frequently impose a fee per day for additional drivers.
  • Excess kilometers: There’s usually a limit to the length of your driving when it comes to kilometers. If you go beyond this limit, you’ll be required to pay extra by the kilometer.
  • Refueling fee: If you don’t drop off the car with a full tank, and haven’t picked a prepaid fuel option, you’ll be expected to spend a premium fuel rate for convenience.
  • Young driver fee: Drivers under the age of 25 are frequently charged a fee. For example, Hertz will require you to pay an extra charge of $16.50 per day while Thrifty charges $27.50 a day.
  • Early return fee: If you return the car earlier than the required date, some companies may impose charges to compensate for the loss of rental returns, but you should still get back the charge for the remaining unused days.
  • Late fees: Some car rental companies don’t produce longer grace periods than others if you return the rental vehicle after the agreed time. Hertz imposes an hourly charge after 29 minutes while Thrifty charges a third of the rental charge for returns up to three hours late and for the whole day for returns thereafter.
  • Fee for losing your GPS or any accessories: Several of the accessories you rent along with the car, such as the GPS, will likely not be included by insurance, and you may be up for a heavy price if you lose them. For example, Budget imposes a $300 plus an admin fee and GST if you lose their GPS unit.

Car hire insurance jargon buster 

Car renters are frequently falling foul of surprising and unclear contract terms. Here are some of the regularly applied terms linking to car hire insurance.

Collision damage waiver (CDW) 

CDW insurance, covering you in the event of damage or theft of the rented vehicle, is normally incorporated as standard if you are renting a car in Europe or Australasia. In the USA, it may have to be obtained individually.  

However, CDW does not work as full protection. All it means is that you will not have to spend the full cost of any repairs, but you will have to provide repair costs up to an agreed level of ‘excess’ which can be as expensive as £2,000, regardless of who caused the damage. 

In addition, CDW normally does not cover any particular car parts such as the windscreen, tires, and undercarriage. 

You will not generally be covered for damage made while you were violating the rental agreement, or produced by negligence, or applying the wrong fuel.

Theft protection (TP) 

This covers you against the total expense of replacing the vehicle if it is stolen while in your care. Like CDW, this insurance normally covers the price, and like CDW it does not include everything. 

For instance, thefts as a result of carelessness, such as leaving the car with the key in it, will not be covered. And there will still be an excessive amount to pay. 

Personal accident insurance (PAI) 

You may also be advised to purchase extra cover for any injury to you or passengers while you are driving the car. However, this would typically be included in your travel insurance. 

In the same way, you may be offered coverage for personal belongings in the car. This is also known as personal effects protection (PEP). Again, this may be included in your travel or home insurance.

Final Thoughts

Car hire excess insurance, also called Collision Damage Excess Waiver Insurance or CDEW, works as a safety precaution against any hidden charges.

Often, when you purchase a standard car hire insurance policy, it is more likely to incorporate Collision Damage Waiver Insurance (CDΕW). Whilst this is quite fine and true, you should also be aware that if the rental car is stolen or damaged, you will more likely than not be held responsible to pay for the excess.

This may not sound too bad; however, with the excess charges extending from £200 to £2,000, it could probably be an eye-watering amount.

The way our product works is fairly straightforward. When purchasing a standard car hire insurance policy, your rental company will cover the vehicle excess through your credit card, and will then subtract this fee in the event of an accident/damage. This is the excess that will be compensated in the event of a claim.

Having to reach into your pocket for a payment that you haven’t planned spending on for whatever reason can prove to be very frustrating. By obtaining a car hire excess insurance policy, you’ll be capable of driving your rental car in any place you like without having any fear of undesired costs.