There are many benefits to hiring a car. To start with, it gives you the ability to explore places public transport doesn’t reach. It also gives you the freedom to travel on your own schedule, and drive a range of cars you can’t afford to buy outright, or otherwise wouldn’t have access to.
Whether it’s for a weekend trip, a work visit, or a longer road journey, hiring a car gives you the flexibility to get around. Nowadays, most vehicle hire companies make it easy to book the make and model you want online. However, there is one part of the process that causes uncertainty for many drivers. That is, should they take out rental car insurance?
Some people accept rental car insurance without much thought. But others hesitate because they wonder if it’s really worth the extra cost. With different coverage options, excess amounts, and fine print to consider, it’s not always clear what level of protection makes sense. That’s why we’ve put together this guide about rental car insurance to provide you with some clarity.
What Is Rental Car Insurance?
Rental car insurance is a type of insurance that protects you financially from costs if a rental vehicle is damaged, stolen, or causes injury/damage to others while you are driving it.
Many rental companies offer cover at the counter as an add-on to the listing hire price. Other drivers choose to take out insurance independently through providers like RentalCover to help them manage the excess costs.
In Australia, rental car insurance often focuses on limiting the excess you pay if the vehicle is damaged or stolen. However, even with basic cover included in the hire agreement, excess amounts can still be high. This insurance is not the same as comprehensive car insurance on your own vehicle. It operates under different conditions and exclusions.
What Does Rental Car Insurance Cover in Australia?
Most rental car insurance policies in Australia cover accidental damage to the vehicle and theft. This usually includes panel damage from minor accidents, damage caused by other vehicles, and loss of the car due to theft. Some policies extend to windscreens, tyres, and roof damage. However, these areas are commonly excluded unless additional cover is purchased.
Hire car insurance coverage may also include third-party damage. This protects you if the rental vehicle causes damage to another car or property. Many rental agreements include basic third-party cover as part of the hire cost. That said, excess still applies.
Collision Damage Waiver (CDW) is commonly included in Australian rental agreements. It reduces your liability rather than removing it completely. Often, it covers items excluded from basic coverage, such as tyres, windscreen replacement, or underbody damage.
What Isn’t Covered by Rental Car Insurance?
It is important to recognise that rental car insurance does not cover every situation. For instance, damage caused by reckless driving, driving under the influence, or breaching the rental agreement is usually excluded. Likewise, off-road driving and unsealed roads are common exclusions. Especially in regional and remote areas of Australia.
You should also be aware that unauthorised drivers can void your cover entirely. This means that if someone not listed on the rental agreement drives the car and is involved in an incident, then insurance protection may not apply.
Other things that are often excluded from standard policies include interior damage, lost keys, and incorrect fuel use. If you intend to take out car rental insurance, it is essential to read the rental agreement carefully to understand what you are covered for. Many disputes arise from exclusions that drivers were not aware of at the time of their booking.
What Is a Rental Car Excess?
Rental car excess is the amount you agree to pay if the rental car is damaged or stolen. In Australia, excess amounts often range from a few hundred dollars to several thousand. Although this depends on the type of vehicle you want to hire and the specific rental provider. It is worth noting that even with insurance included, the excess usually still applies.
Hire car excess reduction options are available from rental companies and third-party insurers. These reduce your out-of-pocket costs in the event of an incident occurring. Some policies reimburse the excess after you pay it upfront. By contrast, others reduce the excess directly.
Many drivers assume that if they take out insurance, they will not incur any costs at all. But this is rarely the case.
Is Rental Car Insurance Worth the Extra Cost?
Rental car insurance is often worth the extra cost for your own peace of mind, if anything. But also to avoid excessive fees in the event of an accident. It can be especially useful if you do not have personal insurance, you’re on a long trip, or driving in risky areas.
However, before committing to a policy, check your existing travel or auto policies first. You may actually be already covered or have cheaper options available to you through your credit card.
Ultimately, the decision of whether to take out car insurance or not is often determined by a person’s level of comfort with risk. If you don’t take it out, you can save money. But if you do, you will remove financial uncertainty and reduce your level of stress during the hiring period.
What Happens If You Damage a Rental Car Without Insurance?
If you damage a rental car and don’t have any insurance, it can get very expensive. Drivers may find themselves being charged for:
- Repairs
- Loss of use while the car is off the road
- Towing fees
- Administrative costs
These charges can add up quickly, even for minor damage, and you often can’t do much to stop them because payment is usually charged to the credit card you provided at the time of your booking.
You should be aware that if you have a dispute, it may take a while to resolve. This might be particularly the case if repair quotes or responsibility are questioned. For these reasons, many drivers decide to take out rental car insurance.
Written By
Matt Banks
Matt is the founder of Autohero.com.au and has been hooked on cars and repairs ever since childhood.
A veteran in automotive since leaving school, Matt has completed his trade as a panel beater and is across all things with wheels.
His first car was a 1967 FORD XR Wagon followed by a string of collectable Holden’s.
Have a question for Matt? Leave a comment below.