Insurance and Excess Reduction

Car rental insurance and excess reduction options

Car hire generally comes with the rental company's standard cover, on the terms of your rental agreement. For covered damage to the rental car, you are liable up to an excess amount. The excess varies between rental companies and vehicle types, and larger vehicles and 4WDs usually have a higher excess. Your quote's Important information shows the excess for your hire. Standard cover generally includes damage to other people's property and vehicles. Check your rental agreement for what it covers.

Whichever option you choose, exclusions apply. Damage to some parts of the car, or damage while you are breaking the rental agreement, can leave you liable for the full cost. See common exclusions below.

You have three main options for managing your liability.

Option 1: Buy excess reduction at the rental desk

Rental companies offer daily excess reduction products. They are often called a Collision Damage Waiver (CDW), Loss Damage Waiver (LDW) or excess reduction. You pay a daily fee at the counter when you collect the car, and your maximum excess is reduced to a lower amount, sometimes to $0.

Advantages:

• You can buy it when you collect the car.
• If the damage is covered, the reduced excess applies straight away.
• You don't pay the full excess and then claim it back.

Disadvantages:

• Cost: it is often the most expensive option.
• Not insurance: a CDW or LDW is a fee paid to the rental company to reduce the excess it can charge to your card if the car is damaged.
• Exclusions still apply: many products exclude damage to particular parts of the car. See common exclusions.

Option 2: Take no option and accept the standard excess

You can hire the car under the rental company's standard cover without buying excess reduction. For covered damage, you are liable up to the standard excess. Excluded damage, or damage while you are breaking the rental agreement, can still leave you liable for the full cost.

Advantages:

• No extra daily cost.
• Standard cover still applies, on the terms of your rental agreement.
• It's your choice: reducing your excess is optional.

Disadvantages:

• High financial exposure: if the car is damaged, the rental company may charge your card the full excess straight away. Once repairs are assessed, you may get a partial refund if the damage costs less than the excess.
• Nothing reduces what you pay: you pay for covered damage up to the full excess.

Option 3: Separate excess insurance

You can buy excess insurance from an independent provider before your trip. It is usually cheaper than excess reduction at the rental desk. On some bookings, DriveNow's booking page offers excess insurance through Prosura. You pay for it when you book, and it is charged in Australian dollars. See making payment.

How it works: you rely on your policy instead of the rental company's excess reduction. If the car is damaged, you pay the rental company first. You then make a claim with your insurer, which reimburses only what your policy covers.

Advantages:

• Lower cost: it is usually cheaper than buying excess reduction at the counter.
• Wider cover: some policies cover areas the rental company's products exclude, such as windscreens, tyres, the underbody, the roof or lost keys. Check what your policy covers.
• Flexibility: policies can often be cancelled before your trip if your plans change.

Disadvantages:

• You pay first: you pay the excess to the rental company, then make a claim with supporting documents, such as the rental agreement, damage report, photos and receipts. Reimbursement can take several weeks.
• Paperwork: keep all documents from the rental company's damage assessment.
• Not instant: you are out of pocket until your claim is processed, and the insurer only reimburses what your policy covers.

Where to find your excess, reduction cost and bond

Excess amounts, the cost of reducing them and the security bond differ between rental companies, vehicles and locations, and they change over time. Before you book, check them in the Important information on your quote. At the counter, the staff will go through the options again before you sign. The bond is a separate hold or charge on your card at pick-up. See security bond for how it works and when it is released.

How the options compare in practice

These examples assume the damage is covered and you kept to the rental agreement. If the damage is excluded, or you breached the agreement, you can be liable for the full repair cost under any option.

Minor damage that costs less than your standard excess, such as a scrape against a bollard in a car park:

• Option 1: you pay up to your reduced excess.
• Option 2: you pay the repair cost.
• Option 3: you pay the repair cost, then make a claim with your insurer for the amount your policy covers.

Serious damage that costs more than your standard excess:

• Option 1: you pay up to your reduced excess.
• Option 2: you pay up to the full standard excess.
• Option 3: you pay up to the full standard excess upfront, then make a claim with your insurer for the amount your policy covers.

Credit Card Rental Car Insurance

Some credit cards include complimentary rental vehicle excess insurance when you use the card to pay for the hire. If you already hold an eligible card, it can be a cost-effective option.

How it works: you pay for the hire with your eligible card and rely on its cover. Check whether the card's terms require you to decline the rental company's excess reduction. If the car is damaged, you pay the rental company first, then make a claim with your card issuer, which reimburses only what the card's terms cover.

Limitations to check:

• Paying with the card: the whole hire usually has to be charged to the card that provides the cover.
• You pay first: like separate excess insurance, you pay the rental company and then make a claim.
• Vehicle limits: luxury cars, motorhomes, campervans, trucks and vehicles above certain values are often excluded.
• Road restrictions: there is no cover for off-road driving or for breaching the rental terms.
• Hire length: cover is usually limited to a maximum number of consecutive days.
• Vulnerable parts: tyres, windscreens, the underbody and roof damage may not be covered.
• Driver age: some policies exclude younger drivers.

Cover varies a lot between card issuers and card types. Card benefits change, so read your card's current insurance terms before you rely on it.

Common Exclusions: What Isn't Covered

Many rental companies' CDW and LDW products exclude damage to certain parts of the car, even when you have bought excess reduction. If damage is excluded, you can be liable for the full repair cost, whatever your excess reduction level. Common exclusions include:

• Windscreen and glass: chips, cracks and breakage
• Tyres: punctures, blowouts and sidewall damage
• Underbody: damage from road debris, speed bumps or flooding
• Roof: damage from low clearances, car park height barriers or branches
• Single-vehicle rollovers: some rental companies exclude rollovers entirely
• Interior damage: stains, burns or tears to upholstery
• Lost keys or lockouts

Cover can also be void if you drive somewhere your agreement doesn't allow. See road restrictions.

Some rental companies sell separate windscreen and tyre protection as a daily add-on. Some separate excess insurance policies also cover these areas. If you will drive on unsealed roads or in regional areas, where windscreen damage is more likely, check whether your chosen option covers glass.

Next steps

• Security bond: the hold on your card at pick-up
• Vehicle inspection: record existing damage before you drive away
• Charges at pick-up: what you may pay at the counter

Part of Booking Your Car in the Car Hire Handbook.