Car rental insurance can be thought of as comprising three main subject headings:

• What risks are there to be covered?
• What cover is available?
• Where does the cover come from and how good is it?

The risks
When you’re driving a hired car, you are exposed to two main categories of risk:

1. Claims from other people that you have damaged their property or injured them (or both) with the hire car. The costs here could be significant. If serious personal injury is involved a court could potentially award 6 or even 7 figure damages against you. If your insurance doesn’t cover it then it will be you that has to pay.
2. Claims from the car rental company that their vehicle has been damaged (or stolen) while being rented by you. As per above, if you don’t have insurance against such damage then you will have to pay from your own finances. This could in theory be as high as the cost of a replacement car.

The cover
The type of insurance that protects you against third party claims is unsurprisingly called Third-Party Liability Insurance.

The car rental insurance that protects you against claims for damage to the rented vehicle itself is called CDW – standing for Collision Damage Waiver.

Sources of the insurance
The car rental companies may or may not include some components of third-party and CDW in their rental price. It is difficult to be precise because practices vary between countries and rental companies. In those countries where they do not, they will usually be very eager to sell you third-party and CDW insurance separately.

You are under no obligation to take the insurance offered (or included) by the car rental companies. You can use your own and you may wish to consider doing so because often it is usually more attractively-priced and may provide more policy features and benefits. These types of policies can be purchased on the Internet from the specialist providers of car rental insurance.

Even if the rental company has included insurance ‘in the price’, you can still ask for a rental only price and then compare the figures for using your own insurance.

The cover of the specialists may be more attractive in some cases because the basic third-party and CDW insurance of the rental companies may contain exclusions and limitations that the policies of the Internet specialist providers generally do not.

You may find for example, that the rental company’s third-party insurance has a maximum payout cap that is set too low. Their CDW may exclude several areas of their car from protection and it may also contain excess of 500 – 1500 pounds. The excess is the amount you would be expected to pay towards the costs of any claims.

The car rental company’s answer to this will be to try and persuade you to purchase extra ‘top-up’ insurance – but this may not be needed if you have your own insurance in place as the policies of the specialists may not contain such limitations.

Summary
No brief article can explain in detail the nature of car rental insurance but the sites of the specialist providers contain a wealth of information. Having a quick look could not only prove educational but it could be the first step towards saving you some money.