Why Paying To Reduce Your Rental Car Excess Is A Waste Of Money

If you're renting a car, it seems prudent to pay to reduce the excess as well -- who wants to be stuck with a huge bill if there's an accident? However, you may well be better off relying on travel insurance instead.

Picture: Phillip Capper

Consumer advocacy group Choice analysed car insurance charges in Australia, and found that the typical per-day rate to reduce your excess is between $19 and $34 a day. Rental companies make insurance look like a sensible option by setting very high excess payments, as these rates show:

Provider Basic excess liability Reduced excess Price to reduce excess (per day)
Thrifty $4000 $500-$0 $26.99-$33
Avis $3017 $342 $24
Budget $2750 $330 $22.73
Europcar $3800 $1000-$0 $21.12-$34.56
Hertz $4000 $1210-$0 $19.09-$29.09

However, travel insurance is often a cheaper and better option. Here are the rates Choice identified for a five-day policy from selected providers, and the amount of excess they cover. (The credit card options are free if you use that card for the hire.)

Provider Excess coverage Price
Worldcare Travel Insurance $6000 $38
1Cover $5000 $36
Good2Go $4000 $35
Tripcover $4000 $59.77
Virgin Australia Velocity High Flyer card $2750 Included
ANZ Platinum card $5000 Included

Not only are those rates lower on a daily basis, travel insurance also covers you for other expenses in the event of an emergency, so it's better value overall.

Whichever option you choose, it pays to check for exclusions. Some policies won't cover you if you use the incorrect fuel type; others don't include damage to windscreens or tires. And in some policies, driving outside of town and city limits in Western Australia or the Northern Territory will also render your insurance void. So check those details carefully!

Choice


Comments

    Also check with your work if they have deals for car rentals. Many do. Commonly the price will sit a little higher than the base rate but give the lower excess. Making it better value than the options above.

    Can you apply travel insurance when you're not on vacation i.e. renting a car in your own city?

      If you want to hire a car in your own city and insure yourself of loss due to the excess, there is only one company in the entire world that does that (at least as far as I'm aware).
      http://www.worldwideinsure.com/car-hire-excess-insurance.php

      You will need their 'deluxe cover' in order to be covered in your home country (including home city).

      More details in my comment below further down this thread.

    Until you get your car dinged by someone else and they refuse to pay. I was stuck with $4000 on my credit card for over a year.
    It is worth it to pay the extra.

      Shouldnt the insurance pay and then recover their own costs off the third party?

    Becareful with relying on travel insurance and credit card insurance to cover this excess. If you read the fine print, they have a limit on how much excess they will pay or they will only pay the excess if you take up all insurance options with the hirer. ANZ has additional product for $24 per year for their cards that covers you up to around $2k excess. A lot of the time, this is not enough to cover the standard excess on the cars. Another tip is if your going to hire a car, make sure you have enough to pay the excess in the case of an accident. Even if its not your fault, you will be liable to pay the excess until proven otherwise which could take weeks. This could put a dampener on your holiday.

    It is always worth it. Also, not to be a stickler, but you have just compared the price. What is the difference in coverage and circumstances for these prices? Ultimately you are swapping one insurance product for another. So what are you actually getting?

      It'll depend on what the coverage is for the insurance offered by the rental as opposed to the card. I dont think its a black and white answer. I have an AMEX Platinum Edge which has travel insurance but it doesn't cover rental car excess at all... so I would be up a creek if I had relied on this article alone.

    Also worth checking online to see if you can get a sweet deal when signing up for a rental membership. When I signed up to Hertz Gold Plus Rewards, a little 'net sleuthing found me a crazy one-time deal that included free insurance by default on all rentals worldwide (among other things, like a flat 15 per cent off all bookings).

    One important this that wasn't mentioned in the article - is when comparing alternative car rental excess insurance options, consider what is actually covered!

    For example, generally standard travel insurance and credit cards only cover the "standard car rental excess". So if the car rental company charges a driver for damage that is not covered by "standard excess" (eg. windscreen, tyre, undercarriage or even single vehicle accidents) then the standard insurance or credit card wont cover the damage either. doh!

    Check this out - on this blog there is a table showing what Thrifty covers and what not, ( https://blog.tripcover.com.au/why-are-car-rental-cdw-costs-so-high-with-major-rental-firms/ ) and get this, even the Thrifty Premium Coverage does not cover Tyres, Windscreens, Undercarriage and Hail. Hence if Thrifty does not even cover it, with their premium product, then the standard travel and credit cards also wont be able to cover it. It's a minefield!

    For people who hire cars relatively often this is probably the BEST option available in the world. It's a UK company but they serve people worldwide. For 46 pounds a year, they will cover you for an unlimited amount of car rentals anywhere in the world EXCLUDING your home country.
    Each individual rental contract must be 31 days or less.

    For an extra 9 pounds, they will also cover you for car rentals in your home country as well with the same terms (maximum rental period 31 days or less). http://www.worldwideinsure.com/car-hire-excess-insurance.php

    If your credit card offers excess cover that is great, but not everybody has a premium credit card and the credit card company won't want to pay if another nominated driver was driving the rental. The credit card company may also refuse to pay you for damages that aren't part of the standard excess. Hitting animals, driving after dusk, multi vehicle accidents etc. You need to be really cautious of this.

    From experience, the excess cover company that covers you for the most exclusions is http://RentalCover.com and should of had a mention above. They will even cover you for keyloss/replacement when the others won't.

    I just checked out the PDF of ANZ rental excess coverage , and it says that only rental cars registered and driven in Aus are covered .

    There are other companies that also offer Rental Car Excess Reduction Products like:
    http://www.allianz.com.au/travel-insurance/rental-car-excess
    https://www.vroomvroomvroom.com.au/insurance/
    These product will reimburse you for the excess liability - I would also advise to check any PDS as it has a complete breakdown of what is covered and what is not. It varies greatly from product sold over the rental counter to there Rental Vehicle Excess insurance.

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