Car Insurance

What is Car Rental Excess Insurance?

Written by:

Nora Ackermann


October 7, 2020

Last updated

August 12, 2022

Reading time

5 minutes

Nora Ackermann

Nora Ackerman is a contributing writer at Oiyo, specialising in personal credit. Nora originates from Germany and holds a Bachelor of Arts from Karlsruhe Institute of Technology and a Master of Arts from the Humboldt University of Berlin. She has extensive experience across the communications and journalism sectors, with her work being published in a number of German publications.

To see the most of a destination, the best way to get around on holiday is by car. However, hiring a car can come with some financial risks. What if someone accidentally scratches your rental car while you are out for a coffee or worse, you’re involved in an accident? Your car rental insurance has got you covered for any worst-case scenarios but often won’t cover the full amount of the damage. You may still have to pay the excess amount out of your own pocket – unless you get car rental excess insurance. Let’s take a closer look at rental car insurance and if it’s worth getting your excess covered. 

What is rental car excess insurance?

Whenever you hire a car, you leave your credit card details, in case any damage happens to the car while you are using it. This may include damage caused by you or any third parties. Car damage can get expensive quite quickly, therefore, your booking will normally include basic car rental insurance. 

Your car rental insurance will cover you for anything that happens to your rental car while it is in your care. This includes scratches and dents, damage caused by car accidents, or natural disasters. However, most regular car insurances won’t fully cover the costs in the event of the car getting damaged or stolen while you are renting it. Your insurance will cover a base amount of the damage while you will have to pay for any additional costs. Let’s say your insurance states it will cover damage up to $3,000. This means you’d have to cover any excess charge yourself. 

How does car rental insurance work?

You can cover most rental vehicles with car rental insurance. This includes any sort of cars, motorbikes, 4WDs and even campervans. Depending on your insurer, limits apply. Your insurance can be limited to a certain weight (often that’s 4.5 tonnes for campervans) or the driving conditions. Some vehicles may not be covered on sand or off-roads. Always make sure to check what’s covered for your rental before taking it to the beach or to the dusty hinterland. 

Things to consider when choosing excess cover?

There are a few things to keep in mind when choosing the right excess cover. It can be tricky to figure out what you are actually liable for according to your car contract. You should always check upfront before you book excess cover.

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Things to look out for include your liabilities regarding:

  • Injuries to third parties
  • Damage to the rental car
  • Damage to a third party's property

The cheapest car rental excess insurances 

When signing off your car rental contract, your hire company is most likely to offer you a daily rate to lower your insurance excess. What sounds like a small amount at first will increase your overall hiring price significantly. If you want to save a few dollars, you should go with a standalone insurer. They are often cheaper and state fewer exclusions in the contract. However, saving money comes with a downside as well.  In case of an accident (or damage), you will have to pay the excess costs out of your own pocket first and claim it back from your insurer. That process can take a while until you see your money back, so bear that in mind during your decision making process.

Also, keep in mind that having reduced your excess to zero (through your car rental insurance or third party insurance) doesn’t necessarily mean that you are covered for all instances. There are plenty of exceptions stated in your contract that would still make you pay. Therefore, it’s always best to play it safe. 

Options for car rental excess insurance Australia?

There are two common options for car rental excess insurance: 

1. Insurance excess reduction through your car rental company. 

Reducing your insurance excess will cost you an additional daily amount (eg, $10 plus your car hire rate). It is most likely slightly more expensive than finding an alternative insurance. However, it will give you peace of mind and in the case of an accident, it will be less hassle to claim your excess reduction. Note that an excess reduction still may not cover the full costs though. Additionally, you want to make sure to read the small print carefully. There may be exceptions stated in your contract that you would prefer to be covered for. 

2. Find a standalone insurer. 

While finding the right deal may take some time, it can save you money in the long run. Especially if you are hiring cars on a more frequent basis, you will find yourself more at ease by knowing that you won’t pay a fortune for every single dint a stranger may cause in a parking lot. However, you will have to pay the excess first from your own credit card and then claim it from your insurance. On the positive side, these insurances normally come with fewer exceptions and for a better price. 

Is car rental insurance worth it?

The biggest benefit of car rental insurance is, whatever happens during your trip, you won’t have to pay the full amount. Even if you choose rental excess reduction, you won’t have to dig deep into your savings to cover for bad luck. When choosing a standalone insurer, you can also customize your car rental excess insurance specific to your needs. If you plan to go off the beaten track, find an insurer that covers unsealed road and tire and undercarriage damage. 

Are there alternatives?

Yes, there are. And you may even have one of them already. When going on a trip, you probably have booked other insurances already, and in this case, it may be worth checking if they cover for any costs associated with damage to a rental car as well. 

Travel insurance

While it may be a little expensive to book full travel insurance for a short trip, it can be worth it if you plan to be on the road for longer. Most domestic and international travel insurance policies will cover your rental car as well and will also cover your luggage. Keep in mind that you may need additional insurance for any extra driver, your travel insurance will only cover you as the driver. 

Credit card travel insurance 

If you use your credit card to hire a car, it’s worth checking if it includes a cover for car insurance excess. Most policies will only cover for international car hire and come with the condition that you paid for the car with the exact same card. However, this can save you money as you won’t have to consider additional insurance.  

Before you jet off on your next trip, read more about travel insurance here. Got more questions on car insurance? We go you, just click right here.

Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.


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