Insurance and Excess Reduction

Car Rental Insurance and Excess Reduction Options

Every car rental in Australia includes a standard insurance policy that covers damage to third-party property and vehicles. However, you — the renter — are liable for damage to the rental vehicle itself, up to an excess amount that can range from $3,000 to $8,250 depending on the supplier and vehicle type.

You have three main options for managing this liability:

Option 1: Purchase Excess Reduction at the Rental Desk

All rental companies offer daily excess reduction products — commonly called Collision Damage Waiver (CDW), Loss Damage Waiver (LDW), or Excess Reduction — that lower your liability in the event of damage.

How it works: You pay a daily fee, and your maximum excess is reduced to a much lower amount (sometimes $0). This is purchased at the counter when you collect the vehicle.

Advantages:

• Convenient — purchased at the same time as your vehicle collection
• No delay in the event of a claim — the reduced excess applies immediately
• No need to pay the full excess upfront and claim it back later

Disadvantages:

• Cost: The most expensive option, typically $20–$40 per day depending on the supplier
• Not insurance: CDW/LDW is not an insurance policy. It is a fee paid to the rental company to reduce the excess they charge your credit card if damage occurs
• Exclusions still apply: Even with excess reduction purchased, many products exclude damage to specific areas (see Common Exclusions below)

Option 2: Take No Option (Accept the Standard Excess)

You can choose to rent under the supplier's standard insurance policy without purchasing any excess reduction. You accept full liability up to the standard excess amount.

Advantages:

• No extra daily cost — you save $20–$40 per day on excess reduction fees
• Standard insurance is included — the rental company's fleet insurance covers third-party damage above the excess amount
• No legal obligation — reducing your excess is entirely optional

Disadvantages:

• High financial exposure — in any accident, the supplier will immediately charge your credit card the full excess amount (up to $8,250). Once repairs are assessed, you may receive a partial refund if the damage costs less than the excess
• No recourse — you pay the full amount of damage up to the excess, with no further avenue to reduce this

Option 3: Independent Third-Party Excess Insurance

A third option is to purchase standalone excess insurance from an independent provider before your trip. This is typically much cheaper than buying excess reduction at the rental desk.

How it works: You decline the rental company's excess reduction, accept the standard high excess, and rely on your third-party policy to reimburse any excess charged in the event of damage. You pay the excess to the rental company first, then claim it back from your insurer.

Advantages:

• Significantly cheaper — third-party policies typically cost $5–$20 per day, compared to $20–$40+ at the counter
• Broader coverage — many policies include windscreen, tyres, undercarriage, roof, and key loss — areas often excluded by rental company CDW products
• Flexibility — can usually be cancelled before your trip if plans change

Disadvantages:

• Reimbursement-based — you must pay the full excess to the rental company upfront, then submit a claim with supporting documentation (rental agreement, damage report, photos, receipts). Reimbursement can take several weeks
• Documentation required — you need to keep all paperwork from the rental company's damage assessment
• Not instant — unlike Option 1, you are out of pocket until the claim is processed

Supplier Excess and Reduction Comparison

The table below shows the standard excess (your maximum liability without any additional cover) and the cost to reduce it, for major car hire suppliers available through DriveNow.

Excess amounts vary by vehicle type — larger vehicles and 4WDs typically attract higher excess amounts. The bond is a separate hold or charge on your credit card at pickup, refunded when the vehicle is returned undamaged.

Real-World Scenarios

To illustrate how the three options compare in practice:

Scenario 1: You scrape a bollard in a car park Repair cost: $1,800

• Option 1 (excess reduction purchased at $30/day): You pay $0–$634 depending on your reduced excess level
• Option 2 (no cover): The supplier charges your credit card the full $1,800
• Option 3 (third-party insurance): The supplier charges your credit card $1,800. You then claim this back from your third-party insurer

Scenario 2: A shopping trolley dents your door Repair cost: $900

• Option 1: You pay $0–$634 depending on your reduced excess
• Option 2: You pay the full $900
• Option 3: You pay $900, then claim it back

Scenario 3: A serious accident with $12,000 in damage Your liability is capped at the excess amount regardless of actual repair costs.

• Option 1: You pay $0–$1,210 (your reduced excess)
• Option 2: You pay $3,000–$8,250 (your full standard excess)
• Option 3: You pay $3,000–$8,250 upfront, then claim it back from your insurer

Credit Card Rental Car Insurance

Some credit cards include complimentary rental vehicle excess insurance when you use the card to pay for your rental. This can be a cost-effective alternative if you already hold an eligible card.

How it works: You decline the rental company's excess reduction, pay for the rental on your eligible credit card, and if damage occurs, you pay the excess to the rental company and then claim reimbursement from your card issuer.

Key limitations to be aware of:

• Must pay on the card — the entire rental must be charged to the card providing the cover
• Reimbursement-based — like Option 3, you pay the excess first and claim it back
• Vehicle restrictions — luxury cars, motorhomes, campervans, trucks and vehicles above certain value thresholds are typically excluded
• Road restrictions — no cover for off-road driving or breach of rental terms
• Rental period limits — usually capped at 31 or 60 consecutive days
• Vulnerable parts often excluded — tyres, windscreen, underbody, and roof damage may not be covered
• Age restrictions — some policies exclude drivers under 21–25

Coverage varies significantly between card issuers and card tiers (typically only available on Platinum or Black cards). Always read the specific terms of your card's insurance before relying on it.

Common Exclusions: What Isn't Covered

Even with excess reduction purchased (Option 1), most rental company CDW/LDW products exclude damage to certain areas of the vehicle. You will be liable for the full repair cost of damage to these areas regardless of your excess reduction level:

• Windscreen and glass — chips, cracks, and breakage
• Tyres — punctures, blowouts, and sidewall damage
• Undercarriage — damage from road debris, speed bumps, or flooding
• Roof — damage from low clearances, car park height barriers, or branches
• Single vehicle rollovers — some suppliers exclude rollover events entirely
• Interior damage — stains, burns, or tears to upholstery
• Key loss or lockout

Some suppliers offer separate windscreen and tyre protection as an additional daily add-on. Third-party excess insurance (Option 3) often includes these areas in their standard coverage, which is one of its key advantages over the rental company's own excess reduction products.

If you are driving on unsealed roads or in regional areas where windscreen damage is more likely, consider whether your chosen option covers glass damage.

Other Things to Consider

When Booking Your Car

• Car Hire Inclusions, Exclusions & Optional Extras
• Car Rental Insurance and Excess Reduction
• How to Use DriveNow's Car Hire Comparison Tools

When Hiring a Car

• Before You Book
• Booking a Car
• During Your Trip
• Managing Your booking
• Picking Up Your Car
• Post Rental Support and Services
• Returning Your Car