Hiring a car on your holiday? Compare travel insurance that covers you for rental excess charges in Australia and abroad
Whether you're driving up the coast of New South Wales for a weekend road trip or taking a 4-wheeled-drive from Christchurch down to Queenstown for a week of snowboarding, car hire is a convenient choice. An accident however, can make hiring a car an expensive activity and is why having travel insurance is a wise move.
Does travel insurance cover me for car hire?
When hiring a car, comprehensive travel insurance policies can cover you for:
- Car hire insurance excess. Car rental excess is the amount you are charged by a rental company if your rental car is damaged, stolen or involved in a collision. Travel insurance policies offer cover for car rental excess charges, which can be upwards of $4,000.
- Transportation of the vehicle back to the car rental depot. If you suffer an injury or illness during your journey, you may not be in a fit condition to drive your rental car to the nearest depot. When this happens, some insurers will cover the cost of returning the car to the nearest depot, as long as you can obtain written confirmation from your medical adviser that you are unable to drive.
How does each travel insurance brand cover car hire excess charges?
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Information last obtained on November 2015 and is subject to change. Make sure you understand the general conditions surrounding car rental excess cover for each policy. For a comprehensive list of the conditions of each policy, please read the product disclosure statement of the policy.
Many travellers are unaware of the fact that rental company insurance excess amounts can be astronomically expensive. A 2015 study by Choice magazine of excess amounts charged by car rental companies showed that the minimum excess amount a driver would be required to pay if their rental was damaged, stolen or involved in a crash was more than $2,700. The excess amounts for car rental pickup from suburban Sydney were as follows:
- Budget: $2,750
- Avis: $3,017
- Europcar: $3,800
- Hertz: $4,000
- Thrifty: $4,000
How about when I am abroad?
As car rental companies will have different insurance agreements in overseas countries, the excess charges will look different. Check with the car rental company how much they will charge you when in the event of theft or damage to your vehicle.
Before you sign your car rental agreement, car rental companies will offer the option to reduce your car rental excess charge for a daily fee. This is often referred to as an excess waiver or excess reduction option, and you will often be able to reduce the excess to zero if you are willing to pay an additional fee. While this may sound like an attractive option, paying a daily fee to reduce your excess can actually work out to be quite costly. A travel insurance policy that includes car rental excess cover is a much more cost-effective way to take out financial protection as shown below.
Cost of rental excess reduction/waiver based on Choice.com.au study. Price of travel insurance based on a standalone policy for domestic trip within Australia. Price last obtained on November 2015.
Other car hire concerns
Travel insurance does not usually cover you for the actual damage you cause to a car or the cost of getting that damage repaired. These costs can be covered by physical damage insurance provided by the rental company. This insurance is commonly known as the loss damage waiver or the collision damage waiver, and it’s usually automatically included in the basic cover provided by a rental company. Many travel insurers will only provide cover if your rental agreement includes some form of motor vehicle insurance.
Travel insurance policies typically include personal liability cover, but they do not offer protection if you injure someone else or damage someone else’s property while driving a rental car. This cover can be obtained through the compulsory liability motor vehicle insurance available from the rental company. In fact, most travel insurers include a requirement for your car rental agreement to have third-party liability motor insurance.
Travel insurance provides cover for medical costs if you’re injured in an accident overseas. If you crash your car and need ambulance transportation, medical treatment, hospital accommodation and even repatriation to Australia, your travel insurer will be able to cover the costs. You won’t receive any cover if you break an exclusion on your policy, such as failing to follow the road rules in the country you’re in, so make sure you’re aware of the exclusions in your policy before you get behind the wheel.
- Basic motor insurance must be included. The car rental company must include CTP (liability) and physical damage cover for the car itself. Most insurers will require both types of cover to be included in your car rental agreement in order for you to qualify for car rental excess cover.
- Licensed rental company. The vehicle must be rented from a licensed rental company or agency.
- Rental agreement compliance. You must comply with all of the rental company’s requirements as outlined in the rental agreement.
- Vehicle limits. There may be specific limits regarding the size of the vehicle’s engine or the number of people it can seat. For example, you may only be covered if the car has no more than nine seats.
- Driving limits. There may be restrictions on where you can drive the vehicle. For example, you may be required to drive only on paved roads.
- Time limit. Some insurers impose a maximum time limit on the rental contract, such as 15 days.
- Insured drivers. The car must only be driven by insured persons listed on your travel insurance policy and the car rental contract.
- Provide documentation in event the event of a claim. You may need to provide copies of supporting documents in order for your car rental excess claim to be approved, such as your rental vehicle agreement, an incident account, an itemised repair bill and written notice from the rental company about the excess you must pay.
Although cover differs between insurers, your car rental excess claim will usually not be paid if:
- You fail to comply with the terms of your rental agreement
- You rent certain excluded vehicles such as commercial vehicles, buses, motorbikes, limousines, or expensive or exotic cars
- You failed to take out collision damage waiver and third-party insurance cover through the rental company
- Your claim is for damage sustained on a road that is not cement or tarmac
- Your claim is for losses sustained because you were driving under the influence of alcohol or drugs, or because you were driving recklessly
- Your claim involves an unauthorised driver not listed on the rental agreement
- Your claim is for theft and you cannot produce the keys to the vehicle due to your own negligence
- Your claim is for theft or damage and your vehicle has been left unlocked or unsecured
- Your claim is for wear and tear or mechanical or electrical breakdown or failure
- Your claim is for blowouts or tyre damage, unless caused by fire, malicious damage or vandalism
- Your claims is for intentional damage by you
- Your claims is for a loss resulting from any sort of illegal activity
- Your claims involves the use of your rental vehicle to carry passengers or property for profit
- You were driving the vehicle without a licence
Other hidden car rental fees you must know about
Unfortunately, car rental companies have a reputation similar to that of many banks when it comes to charging hidden fees. On top of the cost for actually renting a vehicle, you may also have to cover a range of other charges including the following:
- Administrative fee. This is commonly 3-5% of the total cost.
- Credit card surcharges. Expect to pay extra when you charge the cost of the rental to a credit card.
- Registration recovery fee. Rental companies charge this fee to help them recover the costs of registering a vehicle.
- Tolls. Expect to be charged an admin fee on tolls when you use the rental company’s electronic tag on a toll road.
- One-way fee. Not returning the vehicle to the same depot you pick it up from? Don’t be surprised to be slugged with an extra fee.
- Premium location surcharge. This extra fee applies when you rent cars at certain locations, such as major airports, and it’s often calculated as a percentage of the total cost of your rental.
- Additional driver fee. Nominating more than one driver for your car can also attract a charge, and you’ll usually also have to pay an extra fee for young drivers.
- Excess kilometres fee. Be wary of any mileage limits that may apply to your rental agreement. Exceed the limit and you’ll have to pay extra.
- Refuelling fee. If you don’t return your car with a full tank of petrol, you’ll be charged a high price for refilling the tank.
- Accessory fees. If you lose the rental company’s GPS, be aware that this will often not be covered by any insurance. You’ll need to be ready to pay a hefty fee as a result.
- Immediate charge for excess. Your credit card may be charged for the insurance excess upfront. You’ll then have to lodge a claim with your travel insurer in order to be reimbursed.
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