Rental car insurance in Australia

When you rock up to the counter of a rental car company, ready to pick up your ride to head off on your upcoming adventure, you may well be asked if you’re interested in purchasing rental car excess insurance. This insurance often comes at a high price and is charged on top of the total cost of the car rental – so how does it work, and is it actually worth taking out?

Before even arriving to pick up your rental car, it may be a good idea to understand what rental car excess insurance means, what it will cover, and where you can find this type of insurance outside of a car rental company. Here are some important things to know about car rental insurance in Australia:

What is rental car insurance?

When you hire a car in Australia, Compulsory Third Party (CTP) or Green Slip car insurance and standard liability cover often come included as part of the rental fee, to cover legal liability for other drivers and passengers who may be injured if you get into an accident with them.

CTP insurance covers any injuries you may cause to other people in a road traffic accident. Standard liability cover, also known as loss or collision damage waiver (LDW or CDW), can reduce your liability for damage to the rental vehicle and third party property. LDW and CDW are sometimes differentiated by rental companies, with LDW covering against the theft of a rental vehicle.

It’s important to be aware that CTP insurance does not cover you for any personal injuries you may sustain yourself in an accident while driving a hire car. To get this cover, some hire companies may offer personal accident insurance for an additional fee.

While standard liability cover is often included with car rentals in Australia, it is worth checking to confirm that this cover is in place before hiring a vehicle.
Standard liability cover may be subject to a range of exclusions, such as breaches of the rental agreement and damage to certain parts of a car (e.g. windscreens, headlights and tyres). Additional insurance may need to be purchased if you would like cover for this damage, either through the rental car company or from another provider.

As there can be variances with rental car insurance policies, it is always important to read the terms and conditions in the product disclosure statement (PDS) carefully, and ask any questions you may have before confirming your booking.

What is rental car excess insurance?

Rental car excess insurance can reduce or eliminate the excess charged by a rental company if the car you are hiring is damaged or stolen.

An excess is the amount you pay out of pocket if you make an eligible claim under the hire company’s standard liability cover. For example, if your rental agreement states an excess of $4000, you will be responsible for paying any loss or damage to the rental car up to the cost of $4000. Any damage costs over that amount will be covered by the rental car company.

If you do not want to pay the excess stated in your rental agreement, you can reduce or eliminate this amount by purchasing rental car excess insurance. This optional insurance cover will vary in price from provider to provider, depending on factors such as the sort of car you are hiring and for how long .

What does rental car excess cover?

Rental car excess insurance can cover you in a range of situations where you might have to pay an excess, such as when your rental car has been damaged in an accident or stolen, for example. According to insurance provider 1 Cover Travel Insurance, it can also cover you for repairs to the rental vehicle, if this is cheaper than what you would have to pay via your excess, and can even cover you for the cost of having someone return your rental car if you are deemed medically unfit to do so yourself.

What does rental car excess insurance cost?

According to Flight Centre, rental excess insurance fees may range anywhere from $20 to $65 per day. Keep in mind that these types of insurance policies only cover you for the excess amount you are liable for and are subject to a range of exclusions.

What are some common rental car excess insurance exclusions?

There are a number of exclusions attached to rental car excess insurance. These exclusions will vary depending on the insurance provider, level of cover taken out and the terms and conditions of your rental agreement.

Some common scenarios where cover may be excluded under a rental car excess insurance policy may include:

• Breaching the rental agreement (such as disobeying road rules, driving on non-public and unsealed roads, driving under the influence of alcohol and allowing an unauthorised person to drive the vehicle)
• Driving without the correct licence
• Driving recklessly or causing deliberate damage
• Damage arising from water, insects or vermin
• Admin fees and towing fees (unless added to a policy at an additional cost)
• Damage to windscreens, glass, tyres, underbody or roof (unless added to a policy at an additional cost)
• Accidents involving a single vehicle (such as driving into a tree, bridge or tunnel)
• Using the wrong fuel type

For more information on the exclusions and limitations of your rental excess cover, it may be a good idea to read the product disclosure statement (PDS) and policy thoroughly, along with the car rental agreement.

→Related article: What to do if you hit a kangaroo with your car

Where can you find rental car excess insurance?

Rental car excess insurance is offered through a variety of providers, including:

Car hire companies

Most car hire companies offer their own rental excess insurance products, which are often charged as an additional daily fee on top of the standard daily car hire fee.

Travel insurance providers

Many domestic and international travel insurance policies contain cover for car hire excess. Look for differences in such things as cover for a missed or late rental car return, the amount of excess and coverage limits.

Travel insurance is charged on a per person basis, so if you have more than one person driving the hire car, you may need insurance for each person to cover any excess you might be liable for if an accident does occur.

Check with your travel insurance provider to see what they can offer when it comes to rental car excess cover and if any exclusions may apply, including COVID-19 related exclusions.

Consider the benefits and exclusions of each policy carefully against your personal needs before deciding whether to purchase.

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Credit card providers

Some credit card providers may include rental car excess cover as part of their complimentary travel insurance policies.

In order to receive rental car excess cover, many credit card providers will require payment for the rental vehicle to be charged to the card (applicable to complimentary credit card insurance only), and the cardholder/insurance-holder must be the nominated driver and/or driving at the time of the accident that relates to the claim. Some providers may also require you to rent a vehicle from a licensed agency and comply with all requirements of that rental agency to be eligible for this insurance, according to Canstar Research.

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Standalone car rental insurance providers

There are a number of insurance providers that offer stand-alone car rental excess insurance policies when hiring a car domestically and internationally. If you take out one of these specific policies, you will need to pay the excess to the car rental company and then lodge a claim with your stand-alone insurance provider in order to be reimbursed.

What is the best hire car excess insurance in Australia?

The question of the best car hire insurance in Australia is subjective, and the matter will ultimately come down to what best suits your needs and budget. For example, you may find that your travel insurance – if you have it – already includes hire car excess insurance, in which case, you would not need to take it out separately. This may also be the case if your rewards credit card includes travel insurance. Before you take out a policy, it could pay to make sure you are not already covered.

What to do if you have an accident in a rental car

If you are in an accident while driving a rental car, Smith’s Lawyers suggest following these steps:

1. Ensure everyone is safe and call 000 immediately for any injuries.
2. Report the accident to police, as you will require a police report to provide to your rental company’s insurer.
3. Take detailed notes and pictures of the scene and vehicle, ensure you record all damage.
4. Exchange insurance information with any parties involved in the accident and obtain contact information from those parties or any witnesses.
5. If there is damage to the rental car, call the rental car company as soon as possible and ask them what you need to do to make a claim, including what forms you need to fill out.
6. Make enquiries to see if you have any rental car excess cover under your travel insurance policy, credit card or any stand-alone rental car insurance policy that you have purchased. If you do, contact the relevant company and notify them of the accident and ask exactly what they will cover and how you can claim.
7. If there is damage to your rental car, obtain an itemised quote from the hire company for the cost of repairs and if there’s anything in the quote that you don’t understand or that seems excessive, challenge it. Smith’s Lawyers said many car companies try to add miscellaneous fees to quotes or attempt to charge their maximum damage liability fee without providing an itemised quote. If extra charges are placed on your credit card before you have had an opportunity to agree to them, inform your credit card company and see if they will reverse the transaction.
8. Consider seeking legal advice if you were injured and were not the at-fault driver. You might be entitled to compensation towards medical costs and past and future loss of income. As time limits apply, it is best to seek legal advice as soon as possible.

The Australian Securities and Investments Commission’s (ASIC’s) Moneysmart website has information about free legal advice, including legal aid and legal services available by state or territory.

It may be a good idea to take photos of your damaged hire car following an accident to use as evidence when making a claim on the car excess insurance policy.

Is it necessary to get rental car excess insurance?

The question as to whether to purchase rental car excess insurance ultimately depends on your own personal preferences and whether you think it’s worth paying an extra fee to reduce your excess liability while driving a hire car.

It may be a good idea to research and be aware of the rental excess cover options available to you, to read the PDS of any insurance product carefully and to talk with the rental car agency if you have any questions about terms and conditions outlined in the rental agreement.

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