What is rental car insurance?
Rental car insurance helps pay the cost of repairs, theft, or damage if something happens to a rental car while you're using it. When you rent a car in Australia, there are two basic protections generally included in the hire price:
- Compulsory third party (CTP) or Green Slip insurance: A legal requirement covering medical liability for injuries caused to other people in an accident.
- Standard liability cover, also called loss damage waiver (LDW) or collision damage waiver (CDW): This reduces how much you have to pay if the rental car is damaged or stolen, or if you damage someone else's property.
Even with standard cover included, you could still face a high out-of-pocket fee (called an excess) if the car is damaged or stolen. To protect yourself, you can buy extra excess cover to reduce or remove that out-of-pocket cost.
It's important to understand that some companies separate CDW, which only covers crash damage, from LDW, which also covers theft. For this reason, it's important to check the fine print of your insurance before you drive away.
Even with standard cover included, you remain responsible for an out-of-pocket fee called an excess (often thousands of dollars) if damage or theft occurs. To protect yourself, you can purchase optional excess reduction cover to lower or eliminate this fee.
What does rental car insurance cover?
What rental car insurance covers will depend on the provider you choose, as well as the type and level of cover you take out. Depending on the policy, rental car insurance may cover:
- Damage to a rental vehicle following an accident
- Theft or attempted theft of the rental vehicle
- Damage to third-party property
- Rental car excess charges following an eligible claim
- Costs associated with lost, stolen or damaged keys
- Towing and recovery costs
- Windscreen, tyre, roof or underbody damage (where included)
- Administration fees charged by the rental company.
What doesn't rental car insurance cover?
As with any standard car insurance policy, rental car insurance policies generally come with exclusions and limitations, so knowing what you’re covered for before rolling out of the car park is important. Common exclusions may include:
- Damage caused while driving under the influence of alcohol or drugs
- Damage caused by reckless, dangerous or illegal driving
- Allowing an unauthorised driver to use the vehicle
- Driving without a valid licence
- Using the vehicle on roads or in locations prohibited by the rental agreement
- Deliberate damage or misuse of the vehicle
- Mechanical breakdowns unrelated to an insured event
- Damage caused by insects, vermin or gradual wear and tear
- Breaching the rental agreement.
Look out for policies that also exclude cover for items such as tyres, windscreens, roof damage, underbody damage, towing costs and administration fees unless additional cover is purchased.
As exclusions and cover limits differ between providers, always check the policy documents and rental agreement before purchasing cover to ensure you understand exactly what you’re covered for.
Rental company cover vs standalone rental car insurance
When hiring a rental car, you’ll likely be given the option to purchase cover directly from the rental company or through a standalone insurer. Neither one is necessarily ‘better’ than the other, but they can differ in terms of cover or cost. Below are some key differences to consider before signing on the dotted line:
Rental company cover:
- Can be purchased at the time of booking or vehicle collection
- May reduce or eliminate your excess immediately
- Can be added as a daily charge to your rental costs
- Offers convenience by keeping cover and claims with the same provider
- Can cost more than some standalone alternatives.
Standalone rental car insurance:
- Can be purchased separately through an insurer or travel insurance provider
- Potentially costs less than a rental company's cover
- Can cover rental cars hired in Australia, overseas or both
- Often requires you to pay the rental company's excess first and then seek reimbursement through a claim
- May offer different coverage limits and exclusions depending on the policy.
The right option for you will depend on factors such as cost, convenience, the level of cover offered, and any existing insurance you may already have.
How to compare rental car insurance
If you're comparing rental car insurance policies, look beyond the premium and consider what level of protection you're actually getting.
Some factors to consider when you’re comparing policies include:
- The maximum amount payable under the policy
- Excess limits
- Cover for theft of the vehicle
- Windscreen, tyre, roof and underbody cover
- Key replacement cover
- Towing and administration fee cover
- Driver age restrictions
- Domestic and overseas rental vehicle cover
- Policy exclusions and conditions
- The total cost of the cover.
Comparing features, limits and exclusions across multiple providers can help you find a policy that suits your needs and budget.
What is rental car excess insurance?
Rental car excess insurance can reduce or eliminate the excess a rental company charges if your hire car 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 has an excess of $4,000, you will be responsible for paying any loss or damage to the car up to $4,000. Any damage costs over that amount will be covered by the rental car company and its insurer.
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 like the type of car you are hiring and for how long.
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.
What does rental car excess insurance cost?
Rental excess insurance fees may range anywhere from $10 to $74 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.
Is rental car insurance worth it?
Rental car insurance isn't legally required in Australia. However, all registered vehicles must have Compulsory Third Party (CTP) insurance, which covers liability for injuries caused to other people in a road accident.
Whether rental car insurance is worth it will depend on your circumstances and how comfortable you are with the financial risk of paying a large excess if the vehicle is damaged or stolen.
Rental car insurance may be worth considering if:
- Your rental agreement includes a high excess
- You don't have access to rental car excess cover through travel insurance or a credit card
- You want greater certainty about your potential out-of-pocket costs
- You're hiring an expensive vehicle
- You're travelling in unfamiliar locations.
