Why do I need two different types of insurance?

When you rent a car, the company typically wants you to take out insurance in the event of you;

• causing an accident with the rental car which damages the car;
• causing damage or harm to a third party or their property.

The standard form of insurance policy typically pays out toward the above if you make a successful claim, but there is the generally an excess to be taken off any claim you make. The amount of excess may differ depending on the rental company, so it may pay to check this out.

The car excess insurance policy provides you with insurance solely for the amount of excess you have to pay if making a claim and the claim is successful. This type of insurance policy does not payout for anything else, such as third party claims or damage claims.

Do I have to take out insurance?

The answer to this question may depend on the country that you are in when hiring the car and the company you choose. Without insurance you may end up having to pay out an unexpected sum of money if you have an accident in the rental car. If you only have standard rental car insurance, you generally have to pay the excess for a successful claim and the rental company usually takes this from your credit card. If you have rental car excess insurance, the excess is still taken from your credit card and you then claim it back (up to a set limit).

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.