Protect Your Excess

Understanding rental car insurance coverage is important because if you hire a rental car and don’t understand the details, you may end up with a potentially large outlay on your hands.

Rental car insurance coverage – the basics

Car rental insurance seeks to provide you with protection against the financial consequences of an accident that involves:

• costs being awarded against you following injury to another party or damage to their property as a result of your use of the hire car (third party liability insurance) and;
• damage to or theft of, the rental car while you have it under contract.

Rental car insurance coverage – who provides it?

In the UK and many other countries, typically the rental car will be provided with both forms of the above insurance included in the basic rental price. In the USA and some countries, the rental car may come with only limited third-party insurance (possibly none at all).

If the insurance is not included in the price (in the UK by law unlimited third party cover must be included with all rentals) the rental company will typically offer it for sale separately. You may also be able to purchase it (perhaps more cheaply) from the online specialist providers of car rental insurance.

Rental car insurance coverage – what are the issues?

You may find that the insurance that comes with the vehicle (or that you have purchased separately from the rental company) contains two issues that are worthy of some thought if you wish to avoid significant costs following an accident:

• the policy will usually contain an excess – that’s the amount of contribution you may have to make towards the cost of any accident before the rental company’s insurance will start to pay out. The excess is typically in the range £500-£1600;
• the wheels, tyres, roof, undercarriage and windows may all be excluded from cover – if they’re damaged it will be you who pays.

All in all, given these two ‘gaps’ you may find that even a relatively minor accident results in money being charged to your credit card.

Protecting yourself further

The car rental companies will typically offer you the option of purchasing ‘top-up’ insurance or what they may call ‘super-CDW’. To all intents and purposes this is additional insurance that means that the excess will be removed and possibly all areas of the vehicle included in cover.

In fact, you may be able to obtain the same additional protection by purchasing protection insurance (often called ‘excess insurance’) from an online specialist provider of car insurance.

You can use their policies to claim back from them any costs you are charged by the car rental company for ‘excluded area’ damage or excess. These policies are typically cheaper than those of the rental companies.

Another advantage of this type of policy from a specialist provider is that it can be sold to you, the policyholder, either daily or annually. This means that with an annual policy you could cover any car rented by you during the life of the policy (subject to some terms and conditions) thereby saving you even more money.

Rental car insurance coverage is important so making sure you’re getting the best deal possible typically makes sense.

Rental car insurance coverage can be expensive. Even if the basic insurance included with many rentals these days seems quite reasonable, by the time you add on all of the extra insurance you may need to give you a level of cover you feel happy with the costs may have rocketed.

These extra insurances typically cover two areas. The excess, which is the amount you would be liable for in the event of a claim and the exclusions, which are areas of the car normally excluded from the car rental company’s basic insurance cover so that if they are damaged it is you who has to pay for repair.

Often when you rent a car you may leave the final insurance details until you pick up the keys. At that stage if the insurance the car rental company offers you seems expensive, you may have little choice other that to take it if you don’t want to drive away underinsured and potentially liable to pay significant costs. This is what the car rental companies rely on and why they can charge the prices that they do.

If though you’ve taken the time and effort to book your rental car in advance why not do the same with the rental car insurance coverage? That way you have the opportunity to shop round to see what else is available and at what price.

Even if you have opted for a car rental deal which includes for example collision damage waiver insurance (the insurance that covers damage to the rented vehicle) you are perfectly at liberty to purchase top-up and excess insurance elsewhere to increase the amount and type of cover available to you.

Some independent insurance providers specialise in rental car insurance coverage and can either provide you with all of your rental car insurance needs or just those elements left uncovered by the rental car company policy.

You may also find that since the excess policies of the independent providers can also cover any damage to the tyres, roof, undercarriage and windscreen of the car, you are significantly reducing your risks of incurring additional costs.

As well as providing cover on a daily rate basis, these independent specialists can also provide annual excess insurance for car rentals. This type of policy allows you to rent a car on several occasions throughout a given 12-month period. The annual policy is not tied to any rental agreement but covers you, the policyholder as a named driver of the rental car. These policies can be very competitively priced and can offer significant savings if you know in advance that you are going to rent a car on more than one occasion in the year.

Obviously, as with any type of insurance, there may be times when the particular circumstances of your rental may not be compatible with this type of policy. For example longer-term rentals of more than a month may not be covered. Nor typically would rentals for sports cars, vintage cars, or high value luxury vehicles of more than 100000 dollars.

With a little forward planning you should be able to save yourself quite a lot of money on the cost of your rental car insurance coverage.

To some extent it is true to say that people rarely concern themselves about the details of their rental car insurance coverage until such time as they have an accident and need to claim!

It would be nice to say that all rental car insurance coverage was the same throughout the world but unfortunately that is not the case and what is covered will vary considerably depending upon the rental company you use and the country you are renting in. These differences are not just trivial or academic – following even a minor accident they could make the difference between slight inconvenience and a major financial catastrophe.

To understand this, it is necessary to start by examining what insurance may be included in the standard rental price. In some countries and through some rental companies this may in fact be little. Each component of insurance will need to be purchased separately. In other cases the vehicle may come with third party liability cover that will protect against claims from third parties that you have injured them or their property with your vehicle.

The vehicle may also include protection against theft and possibly something called CDW (collision damage waiver). CDW is a form of rental car insurance coverage that protects the renter against damage to the rented vehicle. In other words, if you dent it, CDW may pay some of the repair costs.

The problem with the basic insurance that is included by the rental company (or that is purchased from them) is that the cover it provides may not be adequate and this could come as a nasty shock following an accident.

There are several possible risks. One of these is related to the fact that the third-party liability cover may be financially capped at a certain maximum level. In the UK this type of insurance must be unlimited by law but in other countries it may be capped at a level far below the possible awards of a court following injury to a third-party. If there is a difference, it will be the renter that pays.

CDW cover may also be limited in that many areas of the vehicle such as the wheels, tyres and roofs, may in fact be excluded from cover. If they are damaged then once again the renter will pay.

Finally, many rental company insurance policies carry excess – an amount of money that the renter will have to pay towards the cost of any claim even if they have insurance. This can be anywhere between 500 and 1500 pounds sterling.

It is possible to increase the cover available, or reduce the excess, by purchasing additional ‘top-up’ insurance from the rental company but this can prove expensive.

Fortunately there are specialist insurance companies and brokers online and they often provide a cheaper option for broader rental car insurance coverage. These policies are sold to a policyholder for a given period of time and have the advantage of covering all rented vehicles used during the life of the policy. Typically they will also offer wider coverage for other areas of the vehicle that are often excluded by the rental companies and additional third party liability benefits. As the renter is under no obligation to take insurance from the rental company, this option is worth checking out as a way to save money and obtain a better product.