Reduce expensive excess charges when your rental car is stolen, damaged or involved in an accident.
If you rent a car and it is stolen, maliciously damaged or involved in an accident while in your possession, the rental company will charge you what is known as an excess. This excess can be several thousands of dollars and leave a big dent in your bank balance.
But don’t let this potential expense put you off hiring a car, as car rental excess insurance can help cover the cost of this excess. If you're ready to take out cover right away, follow the secure links below to receive a quote.
Ready to compare car rental excess insurance?
What is car rental excess insurance?
Car rental excess insurance provides cover for the excess charge imposed by a car rental company when your hire vehicle is stolen, maliciously damaged or is involved in an accident (even if the accident wasn’t your fault). The excess payable varies across rental companies but it generally starts at around $3,000 and can be more than $5,000 in some cases.
If you purchase car rental excess insurance, this excess can be reduced to a much smaller amount or even cancelled altogether. And when you consider that this type of insurance is available from $6 a day, it’s well worth considering for some extra peace of mind the next time you hire a car.
- What does car rental excess insurance cost?
- How much is the excess if you don’t have insurance?
- Should I buy excess reduction insurance from a rental company?
- Benefits of standalone car rental excess insurance
- What’s not covered by car rental excess insurance?
- Accidental damage excess vs single-vehicle accident excess
What does car rental excess insurance cover?
Car rental excess insurance can provide two types of cover. Depending on the insurance policy you choose it can either:
- Reduce the excess to a more manageable amount, such as $300 instead of $3,000
- Remove the excess altogether
In cases where the cost of repairing the vehicle costs less than the excess, insurance will cover the repair expenses instead.
Understandably, car rental excess insurance that removes the excess entirely is usually more expensive than a policy that reduces the excess.
Premiums are typically charged at a daily rate – for example, if cover costs $10 a day and you’re hiring a car for seven days, the total charge would be $70.
Most car rental excess insurance policies will cover you for the following types of damage:
- Multiple- and single-vehicle accidents
- Cracked or damaged windscreens
- Overhead damage
- Cracked or damaged lights
- Damage to the car’s undercarriage or wheels
- Damage to bumpers and trim
What options do I have?
Excess reduction cover straight from rental company
If you’ve hired a car before, you’ve probably been encouraged to purchase this type of cover by rental company staff when picking up your vehicle. This insurance is arranged directly through the rental company, making it a quick and convenient option, and requires you to pay an additional charge for every day you rent a car. However, it’s typically more expensive than other options.
Standalone car rental excess insurance policy
The second option is to purchase a standalone car rental excess insurance policy direct from an insurer. These policies are specifically designed to protect you against the excess and often cover damage to areas of the car that are excluded by some rental companies, such as windscreen and tyre damage. It’s usually also cheaper than the cover offered by the rental company.
Travel insurance policy with rental excess insurance feature
The final option is to take out comprehensive travel insurance that offers protection for your car rental excess. Many policies include this cover as standard, but some offer it as an extra-cost option. This not only ensures that you can enjoy cover for car rental excess, but also for a broad range of other travel risks.
|How it works||Pros||Cons|
|Cover from the car rental company||Can be purchased straight from your rental company when you pick up the vehicle. Some companies allow you to reduce the excess only, while others also offer insurance that can see the excess removed altogether|
|Standalone car rental excess insurance||You purchase a policy direct from an insurer before picking up a hire car. The policy provides cover for the car rental company excess up to a set limit.|
|Comprehensive travel insurance||Car rental excess cover is included as a benefit on comprehensive travel insurance. Policies can be purchased direct from the insurer and can also provide an extensive range of other benefits.|
Examine the tables below for a breakdown of the costs involved in each excess cover option. These figures are taken from Choice.com.au's 2015 study of charges.
Excess reduction cover from a car rental company
|Standard excess||What excess is reduced to if you purchase cover||Daily rate to reduce excess (on a 7-day hire)|
|Hertz||$4,000||$1,210 $0||$19.09 $29|
|Thrifty||$4,000||$500 $0||$26.99 $33|
Domestic travel insurance
|Excess covered||How much excess you will be required to pay on claims||Daily rate to cover excess (on a 7-day hire)**||Daily rate to reduce excess**|
|Worldcare Travel Insurance||$6,000||$0||$5.35||$32.35|
** Based on covering a minimum excess of $4,000
Standalone car rental excess cover
|Excess covered||How much excess you will be required to pay on claims||Daily rate to cover excess (on a 7-day hire)**||Daily rate to reduce excess**|
|TripCover||$4,000-$6,000||$0 $300||$10.40 $7.11||$13.87 $9.49|
** Based on covering a minimum excess of $4,000
Is car rental excess insurance worth it? To answer this question, you’ll first need to look at the excess charged by car rental companies in Australia if your hire car is damaged or stolen.
- Avis: $3,017
- Budget: $2,850
- Europcar: $4,180
- Hertz: $4,000
- Thrifty: $4,000
Compare this excess payable to the cost of the car rental excess insurance cover you choose. Remembering that cover is available from around $6 a day, which would add up to $42 for one week’s car hire, it’s easy to see that a good car rental excess insurance policy can provide substantial financial protection.
Should I buy excess reduction insurance from a rental company?
That’s entirely up to you, but remember to consider the benefits and drawbacks of cover provided by your rental company before deciding whether it’s right for you. On the plus side, buying cover from your rental company when you collect your vehicle is a simple and convenient option, and if your car is damaged by a covered event then you’ll certainly be glad you had protection in place.
However, excess reduction insurance from rental companies tends to be the most expensive of the cover options available, and it doesn’t provide the same high level of cover as standalone excess cover. It’s also worth remembering that some policies will only reduce your excess rather than eliminate it entirely, so this should be taken into account when working out whether your rental company provides value for money.
Benefits of standalone car rental excess insurance
Why should you consider standalone car rental excess insurance? There are several compelling reasons:
- It’s affordable. Standalone cover is usually much cheaper than cover purchased through a rental company.
- It’s designed specifically for car rental. Standalone car rental excess cover is designed for one purpose only: to remove or reduce the excess payable when your hire car is stolen or damaged. This means it’s tailored to the needs of car renters and offers benefits other types of cover don’t.
- It also covers your luggage and personal effects. Many policies also provide cover for the theft of or damage to luggage and personal belongings in your vehicle.
- It offers broad cover. Standalone policies often cover damage excluded by rental company policies and travel insurance, such as damage to windscreens and tyres.
- Covers all sorts of vehicles. Sedans, hatchbacks, SUVs and more – most policies cover an extensive range of vehicles as long as they weigh less than 4.5 tonnes.
- Domestic and international policies available. Regardless of whether you’re travelling within Australia or overseas, there are standalone car rental excess policies available to suit your needs.
What’s not covered by car rental excess insurance?
There are some situations and events when car rental excess insurance will not provide any cover. Your claim will not be paid if:
- You use the rental vehicle in breach of your rental agreement
- You use your rental vehicle without a valid licence
- Your claim is for administrative charges or fees imposed by the rental company
- You were driving the rental car while under the influence of drugs or alcohol
- You failed to act sensibly to protect the vehicle or your property
- You did not do everything possible to reduce or minimise your loss
- It arises because you break the law
- You travel against medical advice
- Your claim arises due to a pre-existing medical condition
- Your claim is for consequential loss of any kind, for example loss of enjoyment
- Your claim arises due to mental illness, depression, anxiety or stress
- Your claim arises because you participate in any race, speed or time trial
- Your claim arises from a government authority confiscating, detaining or destroying anything
You should also be aware that different exclusions sometimes apply to each of the types of car rental excess cover available. For example, travel insurance may not cover you if you use the rental vehicle to carry items other than luggage, or if your car is damaged while being driven on an unsealed surface. Meanwhile, excess reduction cover from your rental cover may not cover the excess payable if your vehicle suffers windscreen or tyre damage.
With this in mind, make sure to check the terms and conditions of whichever cover option you choose to work out when you will and will not be covered.
Accidental damage excess vs single-vehicle accident excess
Reading the fine print of rental car insurance cover may be a boring task but it’s also an important one. Giving the terms and conditions a quick read is an easy way to pick up on any crucial distinctions that can make a huge difference to your level of cover.
For example, some insurance policies will only reduce your rental excess if your car is involved in an accident with another vehicle. This is called the accidental damage excess. However, many people are unaware that if they are involved in a single-vehicle accident, such as scraping the car on a wall or maybe hitting a kangaroo, a separate excess will apply on top of the accidental damage excess. This second charge is the single-vehicle accident excess, and can end up adding another couple of thousand dollars to your overall bill.
Most hire car companies will not make you aware of the single vehicle accident excess when you take out cover. Read the fine print of any rental agreement before signing it to familiarise yourself with exactly how many excesses each policy contains, and in which situations they apply.
Car rental excess insurance vs travel insurance
Most comprehensive travel insurance policies, whether for domestic or international trips, will include car rental excess insurance as a built-in feature. Those policies that don’t include it as standard will usually offer it as an extra-cost option.
So what’s the difference between standalone car rental excess insurance and comprehensive travel insurance and which option is the best choice for you? Check out the comparison table below to help you decide.
|Standalone car rental excess insurance||Comprehensive travel insurance|
|What is it designed to do?||Cover car rentals only||Cover a broad range of travel risks and events|
|How much excess cover is available?||Can cover up to $8,000||Cover usually limited to $5,000|
|What damage is covered?||Covers an extensive range of damage||May exclude costs such as damage to bumpers, interior trims, windscreens, tyres and single vehicle accidents|
|Does it cover anything else?||Yes. Luggage and personal effects||Yes.|
|How much does it cost?||Varies depending on insurance provider, length of car hire, standard excess payable and other factors. Prices start from around $6 a day.||Varies depending on many factors including length of journey, where you are going, number and age of travellers covered etc.|
|Why you should consider it|
If you think you could benefit from the extensive additional cover provided by comprehensive travel insurance, you should definitely consider buying it instead of standalone rental excess insurance. Travel insurance includes a long list of benefits for travellers, including cover for:
- Overseas emergency medical expenses
- Cancellation costs when unexpected circumstances force you to cancel your trip
- Lost, stolen and damaged luggage and personal belongings
- Travel delays and delayed or misplaced luggage
- Theft of cash
- Trip interruption
- Personal liability for causing death or bodily injury to someone else
Particularly if you’re planning an overseas holiday, travel insurance is simply an expense you must consider. Medicare doesn’t cover your medical costs overseas, so unless you’re travelling to a country with which Australia has a Reciprocal Health Care Agreement, travel insurance is the only thing standing between you and potentially massive medical bills.
If you’re looking for peace of mind and protection for a broad range of risks and events, travel insurance may very well be the best choice.
What to do if you have an accident in a rental car
If bad luck strikes and you’re involved in an accident in your rental vehicle, keep the following tips in mind:
- Follow the usual steps. Once making sure everyone is safe, take photos of damage to the rental car and all other vehicles involved in the accident. Exchange details with all other drivers and notify the rental company of what has happened as soon as possible.
- Get receipts. If there’s damage to the vehicle requiring repair, get an itemised receipt that outlines the cost of those repairs. This will allow you to dispute any fees or charges you believe to be unfair.
- Get a refund. Some rental companies will automatically charge the maximum excess without first getting a repair quote, or will automatically add extra charges to your card without giving you a chance to dispute them. In these situations, contact your credit card provider to seek a chargeback.
Other car rental fees and charges to avoid
Aside from the excess, there are several other hidden fees and charges you should keep an eye out for when hiring a car:
- Administrative fee. Many car rental companies charge an administrative fee of around 3-4% on top of the cost of hiring a vehicle.
- Credit card surcharges. Expect to fork out a little extra when you pay for a rental with your credit card. However, under the Competition and Consumer Amendment (Payment Surcharges) Act 2016, businesses are not allowed to impose surcharges that exceed the amount it costs the business to process your credit card payment.
- Vehicle registration recovery fee. Often charged daily, this fee is designed to cover the rental company’s costs to register the car.
- Toll admin fees. While some companies will allow you to use your own e-tag, if you use the rental company’s e-tag you will usually be charged an additional admin fee on tolls.
- One-way fees. If you’re dropping off your rental car in a different location to where you picked it up, expect to be charged a one-way or relocation fee.
- Premium location surcharge. You’ll usually need to pay an additional surcharge if you’re picking up a car from what the rental company describes as a ‘premium’ location, for example an airport.
- Additional driver charge. Want to list more than one person to drive the hire car? You’ll usually be charged an additional fee per day.
- Young driver surcharge. This surcharge applies if the hire car will be driven by someone under the age of 25. For example, Redspot charges a young driver fee of $16.50 per day, while Thrifty imposes a daily surcharge of $27.50 on drivers aged 21 to 24.
- Excess kilometres fee. If there’s a limit on the number of kilometres you can drive the rental car and you exceed it, you may be charged an extra fee.
- Refuelling surcharge. If you don’t refuel your vehicle before returning it, you’ll be charged a high price per litre for filling up the tank.
- Early return fee. Some companies will charge fees to compensate for their loss of rental income if you return your car ahead of schedule. However, it’s generally possible to get back the money you’ve been charged for any unused days.
- Late return fee. A grace period usually applies if you’re late returning the car, but check the fine print of your rental agreement for full details.
- Lost accessory fee. If you’ve paid extra to hire a GPS with your rental, you’ll most likely be slugged with a sizable fee if you lose the navigation device.
- Cancellation fees. If you fail to cancel a booking within a certain timeframe, expect to be charged a cancellation fee.
How to avoid unexpected car rental charges
- Inspect first. Make sure you give your rental car a thorough inspection before you drive away and make sure any existing damage is included in the condition report.
- Read the terms and conditions. Take a close look at your rental agreement and the insurance you have in place. Make sure you’re aware of when you are covered and what is excluded.
- Shop around for insurance. If you’re looking for cover to reduce the excess you’ll have to pay in the event of an accident, compare your options and shop around for a better deal. You may be able to find superior cover directly from an insurer rather than buying from the car rental agency.
- Return time. Arrange to return the vehicle at a time when it can be handed over to a person. Get that person to sign-off on the vehicle’s return so that you are not liable for any damage. Consider taking photos of the vehicle when you return it.
- Pay for tolls yourself. If you can, use your own e-tag so that you aren’t slugged with any extra administration charges.
- Damage list. If the car is damaged while it’s in your possession, ask the rental company for an itemised account of any repairs required.
What are my rights when I rent a car?
Most of the rights you have when renting a car are governed by the rental agreement you sign with the car agency, so it pays to read the fine print in this document closely. However, you also have some protection under Australian Consumer Law. Some of these rights include:
- Consumer guarantees. Which means that the vehicle you rent must be of a reasonable quality (roadworthy, clean, free from defects), must match the model you booked and must be fit for the purpose specified by you or the rental company.
- Protection against unfair terms. Australian Consumer Law also offers protection against things like false and misleading claims, and conduct that is deceptive and misleading.
How to make a car rental excess insurance claim
If you purchase excess reduction cover from a car rental company, you’ll simply have the reduced excess charged to your credit card after returning the vehicle. However, if you’re covered by domestic travel insurance or standalone rental excess cover, you’ll need to pay any excess you are charged out of your own pocket and then lodge a claim with the insurer to be reimbursed.
The process for lodging a claim will vary depending on the insurer, but you will usually need to follow a few simple steps:
- Download and complete a claim form
- Provide copies of any supporting documentation requested by the insurer, such as police reports, repair invoices and copies of the rental agreement
- Submit your completed claim form and supporting documents by post, fax or email
Your claim will then be processed and paid as soon as possible. Please note that the benefit you receive may not cover admin and/or transaction fees charged by the rental company.
Car rental tips
When you’re picking up a hire vehicle at the car rental counter, it’s common practice for staff to try and sell you excess reduction insurance. And if you’re standing at the front of a long queue of people, all of whom are just as eager to start their holiday as you are, it can be hard to say no to this optional cover.
But as we’ve discussed above, excess reduction insurance from rental companies often doesn’t provide value for money – even though it can help you avoid paying an excess worth several thousands of dollars, it could still add a few-hundred dollars to the cost of hiring a car.
To avoid being pressured into this expensive purchase at the rental counter, shop around for travel insurance or standalone car rental excess cover before picking up a car. This will ensure that you can avoid the nasty shock of an expensive excess if you’re involved in an accident, without significantly increasing the total cost of your holiday.
Other questions you may have about car rental excess insurance
Am I covered for annual/multi-trips?
If you purchase an annual multi-trip policy for domestic or international travel, it will provide car rental excess cover for all trips you take during a 12-month period.
Will my standalone car rental excess insurance policy cover me for multiple, separate rental vehicles within the same trip?
No. If you hire two separate vehicles you will be liable for two sets of excess fees from your car rental company, so you will need to purchase separate policies. However, travel insurance can provide cover that applies to any vehicles you hire throughout your trip.
Which types of vehicles can I get cover for?
Most insurers will cover any vehicle that has been rented from a licensed motor vehicle rental company, up to a certain weight limit. This includes:
- Cars. Sedans, hatchbacks, coupes, station wagons, SUVs
- Four-wheel drives. 4x4 vehicles
- Campervans and motorhomes. Usually up to 4.5 tonnes
- Minibuses. Usually up to a 12-seater
Make sure you read the PDS carefully to see if your vehicle type is automatically covered, as some insurers may require you to take out a separate policy for larger vehicles like campervans, motorhomes and minibuses. Commercial vehicles of any kind will not be covered by a standard rental excess insurance policy.
Will I be covered if I drive on an unsealed road?
Driving on sealed roads only is a common condition on car rental contracts, and car rental excess insurance policies will not provide any cover if you breach your rental contract. Check the contract and your insurance PDS for more information.
Does my complimentary credit card travel insurance include car rental excess cover?
Yes. This feature is available on some credit cards.
Do rental cars automatically have insurance?
Yes. No matter where you are in Australia, it’s mandatory to have third-party insurance in order to register a car, so make sure the rental company has this type of cover in place. Third-party insurance covers you when you cause injuries to other people.
The rental company’s basic level of cover will automatically set your liability in the event of damage to the vehicle at a certain level, typically around $3,000 or $4,000. This is the excess you will need to pay, but it can also be known by names such as collision damage waiver, loss damage waiver and damage liability fee.
If you want to reduce this excess, you can purchase cover through the rental agency or one of the other options.
Get the latest car insurance news
Record number of claims handled by Financial Services Ombudsman. Read more…