Protect Your Excess

Hiring a car is rarely a low-cost activity, even allowing for deals and special offers etc. The good news is that you could be able to save very significant amounts of money if you are prepared to take a little time and ‘shop-around’ for your car hire cover insurance. How does this work?

Car rental companies want to sell you insurance! In certain countries such as the USA, the car rental price may include little if any insurance and the rental company will try and sell it to you separately.

In others countries the rental price may include some elements of insurance. Although apparently attractive as a deal, in practice this insurance may be limited. It is very likely to exclude damage caused to several areas of the rented vehicle such as the roof, tyres, wheels, undercarriage and windows. It is also likely to carry a large excess of between 500 and 1500 pounds – the ‘excess’ is an amount the rental company may debit to your credit card as your mandatory contribution towards the cost of any accident even if you have their insurance. You may also find that their insurance covering injury to third parties is set at a maximum payout level that is way below the level of a court award following an accident.

‘Top up’ cover

The rental company’s solution to this situation will be to try and sell you additional ‘top-up’ insurance to increase the car hire cover and reduce some of the above limitations.

The reality of life is that a car rental company’s insurance will usually be several times more expensive than similar or even better insurance purchased in the open insurance market. You can find specialist car insurance providers on the Internet offering far better deals. Their policies are different to those of a car rental company because they will cover you the policyholder for a period of days or even annually. During this period the policy will cover any vehicle you rent with the exception of a few specialist types such as sports or very high value cars (over 100k US dollars).

Their policies often come entirely without excess and may not exclude any area of the rental car from damage, so you are getting better cover as well as a lower price.

Excesses

The specialist providers have numerous policies for car hire cover to fit most circumstances. You can use them to supplement the policies of the car hire company or in some cases to replace them altogether. This insurance can even cover you against the car rental company charging you excess if their vehicle comes with insurance included in the price.

It is always possible to ask a car hire company for a ‘hire only’ price and use your own cheaper and better insurance. Apart from in the case of certain ‘special all-in’ deals, they may be willing to accept your full or partial privately purchased insurance. It could save you a lot of money on car hire cover so it is worth checking out these insurance providers and asking the question of the rental company.

When you drive a rented car, you are at risk. Accidents can happen to anyone so having insurance is usually a sound idea. It’s therefore important to ensure that you understand your car hire cover insurance and are confident that it meets your needs.

If you’re renting a car, you may need to think about three categories of ‘risk’. The first is “who signs the big cheque if I injure someone with the car or damage their property?” The second is “who will pay if this car gets stolen?” and then finally “who has to pay if this rented car gets damaged?”

The answer to all three questions is simple if you do not have insurance to cover these risks – you will!

Most car rental companies in most countries will include some components of basic insurance in their rental price, although this is not always the case. In some countries, notably the USA, a more common approach is for renters to buy individual components of insurance separately.

If the insurance is included in the rental price or sold by the car rental separately, it should normally be seen as covering the above three risks. Protecting yourself against claims from third parties is called third party liability insurance. Theft will be called theft insurance and damage will normally be called CDW (Collision Damage Waiver) insurance.

It is important then to understand whether these types of insurance on your rental car actually provide the cover you need. Although in the UK third party insurance cover must by law be unlimited, in some other locations it may be set to a maximum payout level that is unrealistically low given the size of some court awards. The CDW may also exclude damage sustained to several areas of the vehicle amongst the most easily damaged in an accident including the wheels, tyres, undercarriage, windows and roof.

Finally, you will need to consider the excess. The ‘excess’ is a financial amount that the car rental company will stipulate that you’ll need to contribute towards to the cost of a claim as the ‘first part’. This amount is usually between 500 and 1500 pounds.

If you’ve reviewed your insurance and decided that you still feel too exposed by these gaps and limitations, you can purchase ‘top-up’ car hire cover insurance from the rental company. This may reduce the excess and increase CDW cover to other areas of the vehicle – but you should be aware that this insurance is usually considerably more expensive than car hire cover purchased from other sources.

It may be worthwhile checking out the direct insurance companies that sell car hire cover over the Internet. These policies are not only significantly cheaper than the rental companies’ insurance but they offer increased flexibility.

As an example, if you purchase car hire cover from a direct insurance company it would allow you to claim back any excess payments or damage costs to areas of the vehicle excluded by the rental company’s policy. It is also possible to purchase from them additional third party cover, usually called SLI for supplemental liability insurance. These policies are sold to you as a policyholder and for a period of time. During the life of the policy it would cover you for any vehicle rented, subject to certain conditions. Altogether, this may prove a very attractive package. It may be worth investigating further.

You’re taking a very big risk indeed If you drive a rented car without car hire cover insurance.

In most countries of the world, driving a motor vehicle on a public road without certain minimums of insurance is a criminal offence. Not only that, but if you have an accident in a hire car and you are not insured, then you’ll have to pay for all the costs involved.

In fact, in most countries of the world the rented car will come with some forms of basic insurance already included in the price. In others, with the USA being the best example, the basic rental cost may include little if any insurance – all of which is available as an optional extra.

Wherever you are renting, and whatever rental company you are using, you should keep in mind that to reduce your risk of financial catastrophe it is necessary to consider three basic types of rental car insurance.

The first of these is third party or third party liability insurance. This is a form of car hire cover that will meet the costs of any third parties that have been injured or who have had their property damaged, by you in an accident. Although not a problem in the UK where the amount of cover must be unlimited by law, in most other countries you should check to ensure that the maximum amount payable is not capped by the rental company at an unrealistically low level.

The second form of car hire cover comes with theft insurance. This means you will be covered should the rental car be stolen while you’re renting it.

Finally, there is collision damage waiver (or CDW). This is a form of car hire cover that protects the rented vehicle, and your pocket, from damage caused during an accident. Once again, it is usually advisable to check this carefully as it will very probably exclude damage to certain areas of the rented car and in addition carry excess. The excess is that amount of money you will need to pay as ‘the first part’ of the cost of any claim. This excess is usually set at between 500 and 1500 pounds – a lot of money you may have to pay out given you have insurance.

Once you have reviewed the insurance position, you may feel that you would like to protect yourself further by increasing the level of liability cover, removing the exclusions relating to specific areas of the vehicle, reducing the excess payable or perhaps all three

You can do this in one of two ways. The car rental company will offer you additional car hire cover insurance. They may call this ‘top-up’ insurance and it may reduce the excess payable, increase liability cover and possibly cover normally excluded areas of the vehicle.

You may find though that this is expensive – typically much more so than purchasing the same insurance from a direct insurance company online. The specialist insurers will sell insurance that can cover all these risks for you and their prices are usually significantly cheaper than those of the rental companies.

Another major advantage of car hire cover insurance taken out through a direct insurance company is that it can be purchased on a daily or annual basis rather than being linked to a specific car rental. This means that for the lifetime of the policy, the renter will be covered for any vehicle rented (though this may exclude certain specialist vehicles such as sports cars or those with a value in excess of 100,000 pounds). So not only could this option save money but it may also be far more flexible. It may be worth investigating further.

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..