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Car hire excess insurance: what it is and how it could save you thousands


Updated on 01 August 2019 | 3 Comments

If you damage your rental car, the excess could be over £1,000 – and even if you get insurance at the rental desk you could still be ripped off. Here's a solution that could save you around £140.

Car hire, at the best of times, can be surprisingly expensive.

Once you’ve added extra drivers, child seats, sat nav and late returns the bill can become increasingly alarming.

That’s assuming nothing goes wrong.

Car hire excess – the maximum amount you must pay if the car is damaged – is around £1,000 on average, according to a survey of rental car charges in popular European destinations by iCarhireinsurance.com.

The firm found huge discrepancies in rental car excess levels, from £1,708 with Budget in Tenerife, and £435 with Sixt in Larnaca, a difference of £1,273. 

It’s not unknown for customers to be overcharged for even minor repairs by unscrupulous firms.

So, what can you do to avoid paying this excess?

The basic answer – as with other travel problems – is ‘get insurance’. But it’s not quite that simple.

And don’t forget that the excess isn’t the only way car hire companies can rip you off.

Rental desk insurance vs standalone insurance

There are two types of insurance you can get: that provided by the car hire company and car hire excess insurance provided by separate, specialised insurers.

When booking your car hire, or at the desk, you’re likely to be offered insurance.

This can hugely reduce the excess you’d need to pay but check that the policy covers all parts of the car – some excess waivers only apply to theft, and others to problems with tyres.

Yet the main reason not to buy insurance from the car hire company is simple: it’s really expensive.

On average this type of insurance costs £169 a week for a compact car, according to iCarhireinsurance.com, compared to around £28 from a standalone, specialist insurer.

If you hire cars multiple times a year, get an annual policy from a specialist insurer, which can cost as little as £48, could save you even more.

Read more: how to get travel insurance if you have a pre-existing condition.

How it works

Why is specialist car hire insurance so much cheaper?

Well, unlike car hire companies, these insurers can’t depend on a captive audience (you). There are plenty of insurers and it’s possible to compare premiums between different providers.

Secondly, because you’ll need to do a little more work.

Getting a policy takes just a few minutes online, but you will need to get one before you go on holiday.

Alternately, you can get annual cover: just make sure it applies to the region you’re travelling to, as policies covering the USA and Canada typically cost more.

Check that the insurance covers all types of damage to the car and that the excess you’ll need to pay is actually £0 (which is the whole point of this type of cover).

The policy may also cover lost keys, misfuelling and inability to drop off the car.

Car hire excess insurance can also cover lost keys (image: Shutterstock)

Don’t forget your credit card

Other than price, the main difference between the car hire company’s insurance and standalone insurance is when something goes wrong.

With the car hire company’s insurance, you won’t lose money (other than the policy’s excess, if it has one) and you may not have to leave a deposit when you hire the car.

With standalone insurance, the car hire company will take any costs out of your deposit – you then claim and get paid by your insurer.

This might seem like a trivial difference, but it could mean you’re out of pocket for weeks until the insurer pays you.

It also means that car hire companies are likely to insist on a deposit, which usually requires a credit, not debit, card, with a credit limit that can handle the excess.

It’s therefore worth having a credit card that doesn’t charge you fees for purchases or withdrawing cash abroad.

Also take pictures of the car before and after hiring, which could be important in the event of a dispute.

Compare travel credit cards here on loveMONEY

Does your travel insurance cover car hire?

It’s possible that your travel insurance already covers car hire excess costs.

Check your policy carefully, particularly for exclusions of certain types of damage.

Also keep in mind that with travel insurance you generally have to pay an excess, whereas with car hire excess insurance you do not.

If your travel insurance excess is high, it may make sense to get both policies.

Find the best and cheapest travel insurance on loveMONEY’s comparison site

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  • 01 August 2019

    I've found that the answer to all of the anxieties that end up taking "the holiday" out of the overseas holiday, is to holiday in the UK where you can simply use your own car as much as you like, and boost your holiday enjoyment by lobbing the excess money you'd shell out abroad to upping the spend level for your UK holiday activity. Contentment all round.

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  • 05 July 2018

    I found that if I turned up at the desk with insurance already arranged, I would receive a very substandard car - sometimes full of dents and scratches! Some poor soul has "paid" for these to be repaired from their excess. I worked out that using a taxi (and/or public transport) actually works out cheaper and I don't have to worry about parking.

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  • 04 July 2018

    Having just come back from Portugal I can confirm that the whole car rental business is one big scam to upsell you more insurance. I thought that I had covered this by paying an additional £75 via rentalcars.com, the website through which we found the car. The cost of the car rental included apparently Collision Damage Waiver which I have no clue as to what this includes since you have to leave a 1600 Euro deposit in case they rental company (GoldCar) think it fit to deduct whatever they like if the car is scratched or damaged in any way. So, I took out the extra recommended insurance at rentalscar.com as mentioned and they said I was "fully insured". When I get to the Goldcar desk at Faro they then point out the deficiencies of the rentalcars.com policy and offer a special deal to up the insurance cover to mean that you don't have to leave the 1600 Euro deposit and be "fully insured". Because apparently, the rentalscar.com policy doesn't cover vehicle recovery (amongst other things) and so if it broke down and we needed to get to the airport or anywhere else they would take that out of the 1600 Euros. So, we had to pay an additional 200 Euros to be fully insured! The car cost about £100 for 10 days, the insurance cost more than double that. I feel duped by remtalscar.com and miffed that the rental car companies even mention that CDW is included as it's not worth a jot. Even using the suggestion mentioned here you'd have to shell out the 1600 Euros up front and then fight to get back anything taken with the other insurer on your return. Oh and to cap it all, in Portugal they have a number of toll roads and the rental cars have transponders fitted. You can't pay at the toll using cash it's all automated. So, you have to pay for the transponder activation (18 Euros) and pay a 200 Euro deposit for any tolls you use up. You get the balance back, but it's 18 Euros just for the peace of mind knowing that you won't be fined for not having a transponder activated when passing a toll station. The whole thing is a rip off IMHO.

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