What is an excess?

Excess is a term commonly used in all manner of insurance agreements. In the event of any claim you make under the insured terms of the contract, it is the amount for which you remain responsible. The excess is the amount of the insured loss or damage which you pay, before the insurer settles the remainder. Effectively, therefore, an excess represents an uninsured liability.

What this means in terms of car rental agreements, therefore, is that the prescribed sum (the excess) is the maximum amount you might have to pay in the event of loss or damage to the vehicle. If the damage is less than the excess amount, you might find yourself shouldering the entire bill; if the damage is more extensive or the car is entirely written off, you are obliged to pay the whole of the excess amount and the insurer pays the remainder.

Although the exact amount of excess varies from one rental agreement to another and may be quite different in various countries of the world, it may nevertheless range from some £500 to three times that amount.

With the excess commonly represented by such a significant sum, and one that you may have to pay in the event of loss or damage, car hire excess insurance offers a way of indemnifying yourself against such a significant expense – although the car rental company’s excess may stay in place, the liability you may have for paying that sum is covered by your separate car hire excess insurance.

Where may you buy this type of excess insurance?

Because of the relative size of the rental agreement excess, and its potential for leaving you considerably out of pocket, most car hire companies around the world offer the top-up or parallel excess insurance to minimise your personal risk.

Although car hire companies are not principally in the business of selling insurance, of course. Nevertheless they may count on the fact that when many customers step up to the desk and are faced with the prospect of taking on such a large financial responsibility as the excess, they might readily buy the offered excess insurance.

However, you may be able to avoid such a last minute decision, and save yourself a welcome saving in the cost of excess insurance, by buying it in advance from a specialist hire car excess insurance provider.

Why insurance for the excess may be worthwhile

Typically when taking out insurance for a rental car there is a certain amount of excess that the provider expects you to pay, if a claim is made. The amount of excess may differ between car rental companies and in some cases it may differ by a thousand pounds or more.

To gamble or not to gamble that is the question

While the chances are that you have nothing to worry about when driving your rental car and you remain safe and sound, there is also the possibility of you having to make a claim on insurance. With this in mind it is a bit of a gamble when it comes to taking out rental excess insurance. You may be lucky enough not to need it, but on the other hand, you may.

Insurance from rental car companies or independent provider

When you consider that a claim on the rental insurance may lead to you having to find a considerable sum of money, taking out rental excess insurance may be worthwhile. Bear in mind that this type of insurance is not typically included in the basic rental insurance that rental companies often add in with the cost of the rental car. If you want this type of insurance you typically have to add it in. Taking out insurance independently with a specialist provider of car hire excess insurance may prove to be more competitive.

SLI (Supplemental Liability Insurance) may be best thought of as a top-up for third party liability cover.

Third party cover is what protects you financially in the event that someone sues you, claiming damages for personal injury or damage to their property, caused by you and the rental vehicle.

By law in the UK, all car rentals have to have unlimited third party liability cover. That means that no matter how big a court award against you may be, the third party insurance would cover the total amount. You personally would not be financially responsible for any part of the award.

In other countries, including the USA, third party cover may not form any part of the car rental agreement and if it does it may well be very limited.

What this means for you, as the renter of the vehicle, is that if you are in an accident and injure someone or damage their property, then that person may sue you for damages.

If the court award were more that the amount covered by your rental agreement third party insurance, then you would be personally responsible for any shortfall. Given the potential size of awards, particularly somewhere as litigious as the USA, this could represent financial ruin for you.

SLI insurance tops up the third party cover so that, while the amounts payable may still be limited, they may be more in keeping with potential court awards.

In those situations, such as in some USA rentals, where there may be no third party cover; SLI may become the primary rather than the supplemental form of protection.

You may, of course, be able to purchase SLI direct from the car hire company. It may also be on offer from independent car hire insurance specialists who also supply CDW cover and car hire excess insurance products.

You may find that SLI insurance bought from the specialists may be more cost effective and offer wider protection, than that available from the car rental companies.

QUOTE: It is absolutely vital to double-check the terms and conditions before you go.

If you’re planning on travelling long distances on your holiday, check the booking has unlimited mileage, which means you can drive as much as you like without penalty.

Most car hire policies will include cover for damage to the car — called collision damage waiver — and theft as standard.

But car hire companies are relying on drivers who don’t know what they are signing up for, so it helps to understand the jargon.

To begin with you have to know what you’ll pay if you have an accident. Although you have insurance you will still have to pay for the first part of any claim —called the excess.

To begin with you have to know what you’ll pay if you have an accident. Although you have insurance you will still have to pay for the first part of any claim —called the excess.

The average is around £600 but can be as high as £1,000. You pay if the car is damaged in any way — whether it’s a head-on smash, or a tiny scratch. It sounds like a lot, and car hire companies know this.

Then you need to know exactly what is and isn’t included under your car hire insurance. For example, your rental car insurance probably does not cover damage to the wheels, tyres or undercarriage of the vehicle — a chipped windscreen or puncture can end up costing you hundreds of pounds.

Read more: Daily Mail July 2011

The fact, of course, is that many travellers think they’ve done well if they remembered to reserve a hire car, let alone separate insurance to go with it. Knowing that – and the fact that a minimum level of insurance cover is a legal requirement in most countries – then the overwhelming majority of car rental companies naturally offer an insurance package along with the vehicle.

With the rental company’s insurance package, there are a number of considerations you may wish to take into account:

• in some cases, cover might be restricted to the barest legal minimum. Is this really what you want? Would you limit yourself to minimum third party, fire and theft cover, for example, for a brand new car you bought at home;
• beware any damage exclusions. Parts of the vehicle – commonly, the underside, roof, windows and tyres – are in some cases excluded from many standard rental company insurance options;
• the excess can be frighteningly high – between several hundred and a thousand pounds, for instance. Getting car hire excess insurance to cover any excess costs, should a claim be made, may be worth thinking about.

If you remember to get an independent car rental insurance quote before you travel, as well as car hire excess insurance, you can hopefully make sure you have all your hire car insurance needs taken care of, with a suitable cover at a price that suits you.

Although you’re unlikely to have much choice about whether you need insurance for your rental car, therefore, you will typically have some choice about the type of insurance you buy and the level of cover suitable for your needs. The options are often wider than many people think and begin with the initial decision about where to buy cat hire insurance:

• the car rental company: this is probably the most obvious – and perhaps most tempting – choice. The company that rents out the car is also very likely to offer the insurance to drive it. Nevertheless, you might be wary about:
  • the level of cover offered (it is often only enough to meet the local, basic legal requirement);
  • the amount of excess for which you remain liable in the event of any damage (with such excesses often running into several hundreds of pounds); and
  • the cost of the insurance (given that the car hire company is often charging a commission on policies it sells for the actual insurance provider).
• an independent insurance provider: to dispel any worries about the level of insurance cover, including financial protection against any excess that is applicable, and to avoid paying any commission on the insurance policy sold to you by the car hire company, you might instead choose to arrange your own insurance – including separate car hire excess insurance which will help towards any excess you may be liable for in the event of an accident – through an independent provider in advance.

At this stage in the game, the question you may be asking yourself is why you need any more insurance at all, since you had assumed that your rental came with all the required insurance included in the hire price.

The answer to your question may well be that, yes, your rental does come with insurance included and you could very probably just get in the car and legally drive off.

There may be a problem with this though, which arises from the fact that collision damage waiver (CDW), the cover provided by car hire companies, typically does not provide 100% protection.

Your agreement may stipulate that you are responsible for the excess, which could be anywhere between £500-£1600. In addition to this, you’ll typically also find that damage to certain other parts of the car will be excluded from the CDW and so will remain your responsibility.

Buying car hire excess insurance may cover this potential expense for you and may even include the parts typically excluded by the rental company’s CDW.

Buying car hire excess insurance from the car hire company is obviously one option. It may not be the most cost effective solution but if you are at the point of picking up your keys then it may be your only option.

Using an online car rental insurance specialist may give you a bit more choice when it comes to buying car excess insurance and hopefully that could mean you can choose the deal that makes sense for you.

What you may find is that you could still be liable for some of the repair costs if you were to damage the rental car during the period of your hire.

That is because car hire insurance tends to carry an excess. So, if you damage the car this could mean you having to fork out up to £1600 as your contribution to repair costs.

The car hire company will typically offer additional insurance cover known as excess insurance when you pick up your rental car.

This may also cover you against having to pay for damage to other parts of the car, which are typically not covered by the basic collision damage waiver cover.

This could be an additional cost that may bump up the price of your hire quite considerably. Understandably, you may be keen to spend as little as possible on this additional insurance.

Buying car excess insurance from the car hire company is certainly an option and nobody can claim that it is anything other than convenient.

You do have options though and using one of the independent online car hire insurance specialists may be the answer.

Getting an insurance for car hire quote may be the first step on the road to you getting the cover you need and at a price that makes sense.

There’s third party liability cover, which protects you financially if you damage some else’s property or injure them with the hire car.

Then there’s typically a collision damage waiver (CDW) that covers you for damage to the hire car itself. This typically also includes the theft of the car.

Third party cover

If you are hiring a car for use in the UK and certain parts of Europe, then third party liability is likely to be unlimited. This means that if you are sued for damaged, your insurance will cover the costs no matter how high they are.

In some other countries, like the USA, third party liability is likely to be limited which means that potentially only part of the costs would be covered and you would have to fund any shortfall yourself.

In that case, buying Supplemental Liability Insurance (SLI) may typically make sense given the size of potential court awards for damages.

Collision damage waiver

Typical CDW cover tends to carry an excess.

This is the amount of money you would be expected to pay towards any damage to the rental car. Not only that but certain parts of the car may be excluded from CDW cover.

That could mean that you may have to pay significant amounts towards repair costs for the hire car in the event of damage.

You can buy car hire excess insurance to cover yourself against having to pay these charges and you may find that specialist rental car hire insurance companies can offer this excess insurance at prices that may be more cost-effective than those on offer from the car hire companies.

What’s missing

Typical collision damage waiver (CDW) cover has some fairly significant holes in it.

Not only is there the excess; which is the amount the car hire company will expect you to contribute to any claim and which may be somewhere in the region of £500-£1600, but CDW typically also excludes certain parts of the car from cover completely.

So if your hire car is damaged, you could be facing a fairly significant charge to your credit card.

Top-up

You may feel that getting some top-up insurance to cover this kind of exposure may be a good idea.

Your car hire company will certainly offer to sell you some, which may do the job but which may well cost you more than if you shopped around a little.

Planning ahead

Getting a car hire insurance quote for your hire car in advance, may give you the opportunity to have a look round at what car rental insurance specialists have on offer. You may find that they can offer competitively priced cover that may be both suitable and more cost effective then the no-choice option of the car hire company.