Protect Your Excess

Car hire insurance is important. If you don’t get it right you could be taking risks that could seriously damage your financial well being in the event of an accident.

When you hire a car you may find that the insurance offers and options are confusing bordering bewildering! It’s important to remember that what is or is not included in the basic hire price will vary by country and rental company. In some countries virtually no insurance is automatically included and driving a vehicle with little or no insurance is a very large risk. In other countries some basic insurance is included, but upon examination this may be seen as offering insufficient coverage.

Car hire insurance, whether included ‘in the price’ or not, usually exists to cover two primary types of potential risk.

The first of these is the risk to a third party, in other words a person or property you injure or damage with the hired vehicle. This is called third party liability. In many countries this is the minimum insurance required by law before a vehicle can be driven on a public road. In the UK the amount of cover provided by the third-party policy that comes with the car rental is unlimited by law, but in many other countries the car rental company’s policy may be ‘capped’ in terms of maximum payout. These caps may be set at levels that are completely insufficient given the potential large awards made by courts.

The second category of risk covered is that relating to the rented vehicle. If you have only third party insurance and the rented vehicle is damaged, then it will be you that has to meet the full cost of repair.

If the rental agreement includes something called CDW (collision damage waiver) then you will have some cover against many damage types but this again is likely to be limited. The CDW that comes with the rental agreement often excludes damage to areas of the rented car such as roofs, tyres, wheels and windows – all areas easily and expensively damaged. There is also a fair chance that the policy will carry excess – in other words an amount called ‘the first part’ of any damage claim that you as the renter will be expected to pay. The amount of excess may vary but it is likely to be somewhere between 500-1500pounds sterling.

It is possible to take out supplemental or ‘top-up’ insurance to provide additional peace if mind. This additional insurance can be used to increase the amount of third party liability insurance, cover those areas of the vehicle normally excluded from the basic CDW and reduce or eliminate the excess.

It’s quite likely that the car rental company will try to sell these additional insurances at the point of car rental or collection. That has the advantage of being convenient but their policies can be very expensive.

As an alternative, if you are looking for additional car hire insurance to bridge the gaps in the basic cover, the specialist direct insurance companies and brokers may be worth investigating. Their policies can be purchased online and because they are sold to you the policyholder rather than a given car hire, they are valid for most vehicles that you hire during the life of the policy, though there are exceptions, and up to a specified limit of course, which is usually 100,000 pounds. As an example, if a claim arises and you have to pay excess to the car rental company, then the insurance policy will reimburse you. It couldn’t be simpler, and it may well be a lot cheaper than buying the same cover from the rental companies!

The technicalities of hiring a car are usually easy to understand, but understanding the various types of car hire cover insurance is sometimes a harder challenge.

That’s because most car rental companies have their own car hire cover policies that vary from one company to another and to make matters worse, the insurance can also vary depending upon what country you are hiring in.

In general, when hiring a car you will probably have two or three options in terms of finding cover.

Option 1 is to take the car hire cover insurance from the car rental company. This usually works on the basis that included ‘in the price’ are certain basic forms of insurance that may provide limited cover. The rental company will usually invite the renter to buy additional forms of insurance to cover other risks – this is often called top up insurance’.

Option 2 is to buy this ‘top-up’ insurance online from a specialist insurance company or insurance broker.

Why is it necessary to consider top-up car hire cover? The insurance that comes in the price may include only third party liability cover. This would mean that you would be insured for any damage you did to a third party or their property, but any damage caused to the hire vehicle itself would be paid for entirely by you. It’s also worth noting that while the third party liability cover is unlimited by law in the UK, in many other countries it will be capped to a maximum payout level that could be inadequate given the large amounts sometimes awarded by the courts in accident compensation.

Normally the car rental company will either offer at a cost, or include in the basic price, something called CDW (collision damage waiver). This offers some insurance protection against damage to the hired vehicle itself but the basic CDW is usually limited as it excludes damage to certain areas of the vehicle such as the roof, windows, tyres and wheels and it may also carry what’s called excess. The excess is that ‘first part’ amount of any claim that the renter would be expected to pay – typically between 500 and 1500pounds sterling.

If you the renter are uneasy about carrying these risks, then top-up insurance may be the answer as it can reduce the excess, increase the amount of third party liability cover and possibly extend cover to those areas of the vehicle normally ‘excluded’ by the basic cover.

Using the option 1 route above and buying this additional car hire cover insurance from the car rental company is often done almost by default as it is all in the one transaction with rental. This though can prove expensive and there is an alternative that may offer significant cost savings and more flexibility.

The car hire cover policies available from direct insurance companies are sold to you as the policyholder and for a given period (typically by the day or annually). This means they cover not just the one car rental but in fact any car you rent during that period. As such, they usually offer significant cost savings over the same policies purchased from the car rental company. As an option it may be worth considering if you are interested in saving money and obtaining better cover..

Collision damage waiver (or CDW) is a form of insurance that applies to car rental and car rental insurance cover. It is easy to become a little confused by the various insurance options, terms and conditions that car rental companies often brandish around. This confusion can easily mean unnecessary expense so it may be worth taking a minute to consider the insurance position with respect to rented vehicles.

If you are driving a rented vehicle, you have two different types of risk that you probably will need insurance to cover. The first type is third party liability. If you have an accident that results in injury to another person or damage to their property, you will have to pay from your own finances unless you have third party liability insurance in place. Remember – court awards to third parties following an accident can be very high so it is usually advisable to check carefully that the insurance is in place and adequate for your needs.

The second type of risk is related to damage to the rented vehicle itself. Even a small accident could result in bodywork damage running into thousands of pounds/dollars/euros. Once again you will have to pay this yourself unless you have insurance in place.

The insurance that covers damage to the rented vehicle is called collision damage waiver (CDW) or sometimes it may be referred to as loss damage waiver. This insurance will cover some forms of damage to the rented vehicle.

It is difficult to generalise about what sorts of insurance will be included in the rental price because practices here vary by rental company and the country of rental. You will need to check the specifics of this on a rental-by-rental basis.

If collision damage waiver is not included in the basic rental price, the rental company will usually offer it as an optional and chargeable extra. Whether it is included or not, it probably will contain two limitations. It may well exclude damage to certain areas of the vehicle such as the tyres and wheels and additionally it may carry excess.

The excess is the first amount of any claim that you the renter will be expected to pay. The amount here may be anywhere between 500-1500pounds sterling.

Most car rental companies will again offer ‘ top-up’ insurances that may allow you to increase cover to other areas of the vehicle excluded from basic CDW as well as reducing the excess amount. These top-up insurance can prove expensive.

It may be worthwhile looking closely at the collision damage waiver and collision damage waiver excess policies offered by direct insurance companies and insurance brokers. These policies will cover you against many of these risks and frequently offer additional benefits such as increasing the level of third party liability.

They work on the basis that the policy is sold to the policyholder for a period of time, typically daily or annual. They will cover all vehicles rented by the policyholder during that period. Should an accident arise, the policyholder may still need to pay the car hire company the excess but this can then be claimed back from the insurance company.

Collision damage waiver insurance purchased from a general insurance company or broker online will usually be significantly cheaper than if the same insurance is purchased from a car rental company. It may well be worth a look.

When hiring a car, many renters will wish to ensure that they are fully covered by insurance. In theory this should be easy, but in reality, the position with car hire insurance can be slightly complicated and one term that is commonly used, yet frequently misunderstood, is ‘CDW excess insurance’.

When you rent a car it may or may not come with significant insurance included in the rental price. Whether it does or not will depend on the hire company you are using and very probably the country you are renting in. It is worth checking several aspects of the basic ‘in the price’ insurance to make sure that it meets your needs and expectations.

Firstly, it should be examined to see whether or not in contains third party liability insurance. This is the insurance that covers you against any damage you may do to other people or their property with your rented car. If included, it would be worthwhile checking whether or not it is only payable to a specified maximum amount. In the UK by law the amount of cover must be unlimited, but in other countries it could be capped at a low level. It should be remembered that court awards to a third party in the event of an accident could be very high – if your maximum cover amount is too low then you will have to pay the difference.

Secondly, the basic insurance included needs to be examined in terms of what protection it gives you against damage to the rented vehicle itself. If it has only third party then your cover is zero and you will have to pay for any damage to it. It is possible that the rental cost will include what’s called ‘Collision Damage Waiver’ or CDW. This means that your rental vehicle will be insured against certain types of damage.

Sadly, that isn’t quite the end of the story though!

Many of the CDW ‘in the price’ offerings of the car rental companies are limited in their cover. Typically they will exclude damage to certain areas of the car and they will carry excess. The excess is that amount of any claim (sometimes called ‘the first part’) that you as the renter will be expected to pay following an accident.

The excess can be high and a figure of somewhere between 500-1500pounds sterling is not unusual. It could be a painful amount to pay if the vehicle suffers damage.

Fortunately, help is at hand. It is possible to take out a form of insurance called CDW excess insurance. What this does is to cover you against the excess amount should you ever have an accident and be asked to pay it.

CDW excess insurance can be purchased from the car rental company, as can increased third party liability cover but this may prove to be an expensive way of doing things.

A cheaper alternative may be found by looking at the specialist insurance companies and insurance brokers online. These companies offer CDW excess insurance policies that cover you the policyholder not a single rental car. That means that, up to the limit set by the provider which is usually 100,000 pounds, they would cover most vehicles rented by you during the life of the policy, subject to the provider’s terms and conditions – and these policies can be purchased for daily or annual cover. Some of these policies have added benefits such as increasing third party liability cover and covering areas of the rented vehicle typically excluded from car rental company insurance. It may be well worth checking out!

Loss Damage Waiver (LDW) is also perhaps more commonly known as Collision Damage Waiver (CDW). Within the context of car rental insurance, it refers to a type of policy that will cover the renter for damage to the rented vehicle. In the UK it is normally sold with theft cover that will protect the renter against the theft of the vehicle (but not theft of the contents).

With loss damage waiver policies of this type, the rental company is in effect ‘waiving’ or giving up their right to charge the renter for the cost of loss of or damage to their vehicle.

In the UK and many European countries, many car rental companies will quote a rental price to the customer that already includes CDW for the duration of the rental. If the customer is arranging the rental online then the whole thing can be done with one click. Few will give even a passing thought to how much that insurance on its own is actually costing them, whether it is good value for money, whether or not they could have bought the same level of cover elsewhere or even whether or not it is giving them the level of cover they expect.

It may be dangerous to assume that all loss damage waiver policies of this type will cover all of the costs relating to any damage to the vehicle – in fact few if any of the basic ‘in the price’ CDW policies will do so. Many will have exclusions on the most commonly damaged parts of a car such as the windscreen, tyres, roof and undercarriage. This means that in the event of damage to any of these areas it is still the renter who has to pay.

In addition to this most CDW policies will carry what’s called ‘excess’, something that obliges the renter of the vehicle to meet the first part of the costs relating to a claim. Some companies set excesses anywhere between 500 and 1500 pounds, something that means in the event of a claim the renter would have to pay up to this amount before the insurer would contribute to the costs. Most car hire companies will offer for a price, additional insurance sometimes called ‘excess waiver insurance’ that can be used to reduce or remove the excess. It is worth noting that even with such additional cover, the costs of any damage to those items commonly excluded from policies may still have to be met by the renter.

Contrary to what many may believe, the purchase of these types of insurance from the car rental company is not obligatory. It is in fact possible to purchase collision damage waiver or loss damage waiver from direct specialist insurance companies or brokers rather than the car rental company. Many of these companies will offer LDW or CDW policies that include those all-important areas of the windscreen, roof, tyres and undercarriage.

Loss damage waiver policies bought from specialist insurance companies can be purchased on a daily or an annual basis. With this type of insurance it is the policyholder who is insured rather than the rental. The policyholder can therefore use the same policy for any number of rentals within the duration of the insurance. This kind of arrangement can be especially useful if the policyholder plans to rent vehicles on a number of occasions over a specified time period and there could be significant savings when compared to the daily rates charged by car rental companies.