When you’re hiring a car, like many renters you may find that the rental price includes some elements of insurance (although this may not be the case in the USA, Canada and a few other countries around the world). That may sound like a great thing and it may be, but typically it is unlikely to be all-inclusive in the sense that it will protect you from all costs following an accident.

The problem is that insurance supplied by a car rental company may bring with it the much-dreaded ‘excess’.

The excess is an amount of money, typically between £500-£1500, that the car rental company’s insurance will insist you pay as the first-part of any claim. It a sense, it can be seen as a mandatory contribution.

In other words, with an excess of £1000 and a claim for damage to the hire car of £800, you’re likely to see an £800 charge to your credit card. If the damage repairs had cost £1100, you would have been charged £1000 and the rental company’s insurance would have contributed the extra £100.

This is not always a risk people are prepared to accept and it is possible to do something about it.

The rental companies will typically be eager to charge you extra for insurance that will ‘top-up’ your cover by reducing or removing that excess.

You can also achieve the same thing and typically more cheaply, by purchasing what’s called ‘excess insurance’ from the specialist Internet-based providers of car insurance. If the rental company does bill you for ‘excess’, you can simply claim this back.

The specialist providers also have another trick up their sleeve in that they can sell such policies on an annual basis rather than just for the duration of a given car rental. The annual hire car insurance policy would then offer you protection against excess charges for any vehicle rented in the lifetime of the policy.

This annual hire car insurance may offer regular renters very attractive options for saving both time and money – in fact it may even be beneficial if you plan to rent just once in the period.

The annual hire car insurance sold by the specialist providers may not cover certain types of specialist vehicle hire such as sports cars or motor homes. Full details are typically available on their web sites.

If the idea of purchasing ‘additional insurance’ for a rented car doesn’t immediately seem to sound like the best idea you’ve ever heard, it may pay to read on. You may save yourself some serious amounts of money!

Rental company insurance cover

The rental company’s insurance whether purchased separately or included in the rental cost, typically provides cover against third-party claims (third party liability insurance) and damage to the rental car (CDW or Collision Damage Waiver).

It may also come with what’s called an ‘excess’.

The excess is a financial amount, usually set between £500-£1500, (though it can vary from this) that you agree to pay as the ‘first part’ of any future claim during your confirmation of the booking and signing of the contract at car collection.

Once in place, it means that you may find significant amounts of money being billed to your credit card after an accident.

The maths is typically pretty simple. If you have an excess of £750 and there is a £500 repair bill to the hire car following an accident, you will find the entire £500 billed to your credit card. Had the damage cost £1000 to repair, you would have been billed for £750 as the full excess and the rental company’s policy would have paid the remaining £250.

Protecting yourself against excess charges

The excess constitutes a considerable financial risk for renters and the hire companies recognise that fact.

They may offer the option of protecting yourself further by paying them additional sums for what they sometimes call ‘top-up insurance’ or perhaps ‘Super-CDW’. For an additional sum, this form of additional car hire excess insurance will typically reduce or even possibly remove the excess from the policy.

What the car rental company may be less inclined to tell you though, is that you may be able to achieve the same degree of protection (or possibly even more) and at a lower cost by purchasing your car hire excess insurance not from them but from an Internet based specialist provider of car rental insurance.

The Internet car hire excess insurance market

On the Internet there are companies that specialist in car rental insurance cover and typically their prices will be lower than those of the rental companies. They also sell something that they may call ‘excess insurance’ and if you are charged an excess by a rental company, then all you have to do is get this reimbursed to you through your own direct excess policy.

Another potential advantage of purchasing this insurance from a direct provider is that they may also offer it on an annual basis. If you have an annual policy then subject to a few restrictions around specialist vehicle types (e.g. sports cars) it would typically provide financial protection for any vehicle you rent during the life of the policy.

If you rent regularly or even more than once in a year, an annual policy may offer even more scope for saving both time and money.

The car hire excess insurance sold by the specialist providers may be worth investigating further if you’d like to improve your peace of mind when driving that hire car.

The excess on a car rental insurance policy

When you are driving your rented car, you probably would like to believe that your insurance cover offers you total protection against all eventualities.

Unfortunately, that may not be the case. Whether the insurance was included in the rental price or you purchased it separately from the rental company (as is typically the case in the USA) the chances are that it will contain an excess set between £500 and £1500. Of course this can vary among insurers.

This means that in the event of a claim (such as if you have damaged the rental car in some way) the rental company’s insurance will only pay out after you have paid the ‘first part’ of the claim.

In other words, if you have a claim totalling £800 and an excess of £1000, you will typically find the £800 billed to your credit card by the rental company. Had the claim been for £1200, the charge to your card may have been £1000 and only £200 will be met by the rental company’s insurance policy.

Excess insurance

If the thought of this doesn’t exactly make you feel comfortable, you can pay the rental company for extra insurance. They may call this ‘top-up protection’ or ‘Super CDW’. For the additional cost they may agree to reduce or remove the excess amount.

Their option here is typically more expensive than the alternative offered by the specialist Internet providers of car rental insurance. These providers offer policies typically called ‘excess insurance’ that will reimburse you for any excess charges billed to your credit card by the rental company following an accident and related claim.

This may be a good idea, particularly given the harsh reality that following an accident you may have little or no control over who is assessing the damage to the vehicle or who is making the repairs and at what cost.

The internet-based specialist providers of rental car insurance

There may be two other significant advantages to purchasing excess cover from the specialists:

• their policies typically may be purchased for a period of up to 12 months and provide cover to you the policyholder rather than a specific vehicle rental – this means that they may cover any vehicle you rent during the period (subject to terms and conditions);
• you may find that the rental company’s insurance also excludes several areas of the vehicle from its cover – these may be covered automatically by your excess policy.

You can find out more about the benefits of excess insurance by checking the website of a specialist provider.

What’s going on?

This may arise because of something called ‘the excess’.

When you rent a car, it may come with certain forms of insurance included in the rental price. If it does not, typically the rental company will offer it to you for sale separately. In either case, the rental company’s insurance cover will most likely contain an excess – that’s the amount of money they may expect you to pay as the ‘first part’ of any claim.

It works in a relatively straightforward fashion. If the rental car is damaged to the tune of £1500 and you have an excess on the policy of £1000, then you will have to pay the first £1000 of the claim and the rental company’s insurance will cover the remaining £500.

The excess on policies provided by car rental companies is typically between £500 and £1500 and may be charged directly to your credit card. Of course, these amounts vary from insurer to insurer, so do check the excess amount.

Can these cost risks be removed?

Yes. The first option is to pay extra money to the hire company. For that, they may agree to remove the excess or at least reduce its level.

You may find though that the online specialist providers of car excess insurance offer a cheaper option. This form of insurance cover means that if you did suffer an ‘excess charge’ to your credit card following an accident, then you could simply reclaim it from your own car excess insurance policy.

Is lower cost the only benefit?

Typically, no. The car rental companies’ insurance may also exclude several areas of their vehicle from cover. If you damage any of them, it will be your credit card that gets billed for repair. You may find that any such ‘excluded area damage’ would also be covered by your excess insurance policy as well.

These policies may also be purchasable on an annual basis. This would mean that any car rented by you during the period would be covered (some specialist vehicle rentals may be excluded). This may offer big cost and time saving for regular renters.

Where is there more information?

The specialist internet providers of car excess insurance typically have websites that contain full details and prices. It may be a good idea to check them out before you hire your next car.

It can often come as something of a surprise at the last moment when you sign a deal to find that the excess on a policy provided by the rental company is quite high – perhaps as much as several hundred pounds depending on the car and where you are renting.

This has obvious implications as even if something happens which damages the vehicle which was not your fault you can end up paying a considerable amount of money.

To give an example, if you rented a brand new Audi from a dealer which was targeted by thieves who break in and steal a sound system, you could be liable to pay the first £300 towards its replacement if there is an excess of £300 on the policy provided by the rental company.

This is not only extremely frustrating but also potentially very costly. You may find you even end up paying more than it has cost you to rent the car, which is why some people have turned to taking out excess insurance.

Car insurance with liability in a rental deal of course does give you some peace of mind in that you do not necessarily need to overly worry if you do have an accident or even if the car is stolen completely. However, having to pay the extra charge of an excess can seriously hurt your wallet. If something happens you are likely to have to sign a report before the rental car company simply takes off the excess amount from the credit card you provided them with at the start of the rental agreement.

With excess insurance you can simply claim for reimbursement on the policy you have taken out. Note that it’s true that a number of rental car companies will offer their own form of excess insurance at the counter, but you are perfectly entitled to refuse this when you get there, but accept the basic car insurance with liability in the rental deal, having sorted out your own excess protection before you arrived.

But anyone who has rented a car before will know that while it is easy to sign up to an insurance deal provided by the rental company, there will nearly always be an excess.

As with other forms of insurance, car insurance excess is an initial fee you agree to pay before the insurance kicks in properly. So if the policy has an excess of £300 pounds and there is an incident which damages the car to the tune of £600, the policyholder will be liable for the first £300 in costs.

When you take out a rented car insurance deal, attached to it the excess can be anything from a couple of hundred pounds all the way up to over £1000 depending on the country and the type of vehicle. This can mean you may end up paying out a considerable amount of money even though you have an insurance policy covering the car.

Rental car insurance coverage can therefore sometimes make drivers uneasy as they know they are driving an unfamiliar vehicle on unfamiliar roads with an excess hanging over them. However, it is possible to take out excess insurance which will protect you in the event you do have an accident or suffer a theft.

This is a kind of independent policy which is like a bolt on to the insurance the rental company will provide. You can take it out before you travel and some companies even allow you to cover yourself for up to a year, guarding your excess on a number of trips.

To claim on this kind of policy you simply have to telephone a hotline to apply to have the excess which you have paid refunded by the insurance company. So in the event of an accident or theft the rental car company may take the excess off your credit card automatically – and you can then apply on your independent excess insurance to have this refunded.

Rental car insurance coverage therefore need not always come with that irritating catch of an excess, and for a few pounds you can protect yourself against even this unwanted charge while you get on with enjoying your holiday or business trip.

The origin of the ‘excess’

The ‘excess’ is a common insurance technique used by insurance companies to help keep the cost of the insurance (the premium) a little lower to you the client.

It means essentially that if you take the car rental company’s ‘basic’ insurance, you also agree to pay the ‘first-part’ of any subsequent claim to the limit specified by the excess.

That’s a bit of a mouthful and it’s perhaps more easily explained with an example.

The excess on your car hire insurance policy is set at say 750 pounds (and it is typically between 500 and 1500 pounds). You subsequently have an accident resulting in a claim for 2000 pounds. The rental company will debit your credit card for 750 pounds as ‘the excess and first part’ of the claim. They will then recover the remaining balance of 1250 pounds from their insurance company.

Had the claim totalled say 500 pounds, you would have had to pay it all even though you had insurance in place.

The excess is frequently controversial and is disliked by many car hire clients, particularly as you may have no control over who assesses any damage involved in an accident or who repairs it and at what cost.

Options to avoid the risks of excess
The car rental companies will reduce the excess or remove it entirely – for an extra cost. This they may refer to as ‘top-up’ insurance, ‘excess car hire insurance’ or in some cases perhaps ‘super CDW cover’.

You may though wish to consider another and usually far cheaper option to deal with the risks of excess, but to explain this we’ll need to think a little about car hire insurance.

The nature of car rental insurance
Your car rental company may have rented the car to you and included some components of insurance in the deal. If they didn’t, they will probably try to sell it to you separately. Whatever the situation in your case, their basic cover will usually include hefty excess.

You are though under no obligation to take the insurance they included in the deal or offered you for sale (with some exceptions such as some fly-drive holidays and perhaps some special offers). Even if it is already included, you can ask for a rental-only price and then purchase and use your own versions of car rental insurance.

On the Internet you will find a very active and competitive Insurance market including the specialist providers of various forms of car rental insurance. Their prices are almost invariably far cheaper than those of the rental companies and they may well carry no excess at all. If they have no excess then clearly you don’t need to purchase additional excess car hire insurance – because you have no such risk!

The specialist providers and excess insurance
For whatever reason, you may have decided to accept the rental company’s insurance but remain worried about their excess. The good news is that you don’t have to pay yet more money to them for excess insurance.

The specialist providers can also sell excess insurance that means they will reimburse you should you be charged excess by your rental company. Their excess car hire insurance typically will be much cheaper than that of the rental company and it can even be sold as an annual policy to cover you for any vehicles rented in the period (subject to some exclusions for very specialised vehicle types). It might be worth looking at in more detail.

Normally when you hire a car in the likes of Europe, South Africa, New Zealand and Australia you’re provided with an insurance policy by the rental firm. This normally covers damage, third party liability and theft.

But you will also have to agree to an excess – an initial amount you have to pay towards the cost of any repairs or replacement before the insurance kicks in, in full.

This can be quite considerable and may be in the region of £200 or £300 all the way up to over £1000. As such car rental insurance often comes with something of a catch which means you could end up paying out hundreds of pounds or more for something which was not your fault.

Excess insurance is a voluntary kind of cover can be bought from independent online companies. Normally a policy will cover you for excess on damage to the vehicle, the excess on theft and on damage to windows, tyres and the undercarriage and roof.

The detail of this is important because some car hire companies will try to sell you excess insurance themselves, but this often excludes undercarriage damage and window and tyre damage.

Furthermore, it is possible to buy annual excess insurance policies which include unlimited use over the period of one year. To give an example, if you hired a car for 15 days in June, you can also hire another one later in the year and typically be fully covered without the need to buy an extra policy.

Common conditions include that no one rental is longer than around a month and it is usual to find that to be covered properly you have to rent the car a set distance from your home address – ie not rent a car close to where you live for the insurance to be active.

It is also usual to find that not only the policyholder is covered, but also any drivers named on the car’s rental agreement. There are a few other things to bear in mind if you are renting a car in places like America and Canada. Here it is common to find you do not get an insurance policy as standard but are offered the opportunity of purchasing one perhaps for a daily fee. Excesses are not charged in general but the person renting the car is often considered to be responsible for any damage to windows, tyres, the roof and the undercarriage.

Excess insurance works by either refunding the cost of excess which is taken straight off your credit card by the car rental company, or by simply paying the excess for you once you have shown your agreement for excess insurance to the car rental company, taking the headache of excess charges away from a car rental insurance deal.

• 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 easily 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 it is usually very much cheaper and often provides better and more comprehensive cover. 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 better 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 a lot of money.

When you hire a vehicle in a number of countries including the UK, most of Europe, Africa, Australia and New Zealand and most of the middle and far east, collision damage waiver, theft and third party liability are often included in the rental car price. Fortunately there is pretty much always an excess which can sometimes be referred to as the non waiver or deductible – this is the potential cost which is protected by your car hire excess insurance policy.

What normally happens is that car rental company will take your credit card number upon signing car over to you – this is so they can simply remove the excess from your card in the event of a collision, theft or similar problem – but if you have excess insurance you can simply claim is back.

All you would have to do is call a helpline within a set time frame from the incident or on your return from your holiday, whichever happens sooner. You will be asked some basic information about your claim which will then processed, and subject to acceptance, you simply have the annoying excess fee refunded to you.

Although depending on where you’re going the excess can be referred to as the super CDW non waiver or deductible, they all refer to essentially the same thing which means a potential cost – this can be particularly infuriating if something happens which was not your fault, i.e. the badge is removed from the car in an act of vandalism overnight.

A car hire excess insurance policy covers most vehicles but may not protect certain types. Typically this includes recreational vehicles including off road vehicles, vans, trucks, motorcycles, and motor homes. Besides this, you’ll be protected provided you hire the vehicle for a reasonable distance away from your home address – normally at least 25 miles.