Car hire excess insurance: how to avoid big bills

Car hire excess insurance covers the big bill you owe a rental company if the car is damaged or stolen. That bill is the excess, and on a basic hire it often tops $5,000. You can pay the rental company to cut it, or buy a separate policy that pays it back. Both can work, but they cover different things.

This guide explains what the excess is, compares the two kinds of cover, and lists what to check in the fine print before you pay.

What the excess is

The excess is the most you must pay out of your own pocket when the hire car is damaged. If the repair bill is smaller than the excess, you pay the whole bill. If it is bigger, you pay the excess and the rental company's cover handles the rest, as long as you followed the rental agreement.

The amounts are large. CHOICE looked at the cheapest car hire from Sydney Airport. The standard excess ranged from $4,950 at SIXT to $5,500 at Hertz, Europcar and Thrifty, with Avis and Budget at $5,445. Excess is often higher again for luxury cars and 4WDs, and for younger drivers.

Sources for this section: CHOICE, Car hire excess and hidden fees.

Cover sold by the rental company

At the counter, the company will offer to lower your excess, or cut it to zero, for a daily fee. The big plus is that it is simple. You deal with one company, and if you paid to cut the excess to nothing, you do not need to dip into your own money after a crash.

The cost is the catch. In CHOICE's comparison, one-day prices for excess reduction ran from $40 to $74, and several were the same price each day on a longer hire. Over a week, that adds up fast. CHOICE also noted that Avis and Budget could only cut the excess to $838 online. Zero excess had to be bought at the counter.

Sources for this section: CHOICE, Car hire excess and hidden fees.

Standalone excess cover and travel insurance

A standalone policy is bought from an insurer, not from the rental company. You pay the excess to the rental company after a claim, then claim that money back from the insurer. CHOICE found this is often the cheapest way to cover the excess, especially for hires longer than one day. In its comparison, daily prices over seven days for standalone products ran from $15 to $22.

Standalone policies can also cover items the rental contract often leaves out, such as windscreens, tyres and underbody damage. Cover limits vary. CHOICE listed one product at up to $10,000 and another at up to $100,000.

Travel insurance is a third route. Moneysmart, the government's money guidance site, says most travel insurance policies include car hire in some form. CHOICE warns that a travel policy usually covers only what the rental company already covers. Some domestic policies also pay out only up to $5,000, which is below the standard excess at most rental companies. Credit card travel insurance generally does not cover car hire inside Australia.

Sources for this section: CHOICE, Car hire excess and hidden fees; Moneysmart, Travel insurance.

What to read in the fine print

Even a zero excess does not mean you owe nothing. Check these points before you pay.

• Excluded parts: windscreens, tyres, headlights, and overhead or underbody damage are common gaps.
• Excluded roads and times: some agreements ban driving on unsealed roads, above the snow line in ski season, or outside town limits between dusk and dawn in Western Australia and the Northern Territory.
• Who drives: an unauthorised driver can void cover. Travel insurance is charged per person, so each driver needs their own.
• Breaches: breaking a road rule, using the wrong fuel or driving under the influence can leave you liable for far more than the excess.
• Extra costs: you may also owe towing, admin fees and the rental company's lost income while the car is off the road.

Sources for this section: CHOICE, Car hire excess and hidden fees.

How to choose and what to do after damage

Ask the rental company three things before you sign: how much is the excess for this car, when is it higher, and what does its cover leave out. Then compare the daily price against a standalone policy for your number of days. For a long trip, standalone cover usually costs less. For a one-day hire, the company's own product may be fine.

If the car is damaged, get an itemised repair receipt and read every charge. CHOICE reports that some renters had extra fees dropped after they challenged them, and that some companies charged the full excess without a repair quote. If a charge hits your card without warning, you can ask your card provider about a chargeback.

Sources for this section: CHOICE, Car hire excess and hidden fees.

Sources

1. CHOICE, Car hire excess and hidden fees (last updated 1 August 2023): choice.com.au
2. Moneysmart, Travel insurance: moneysmart.gov.au