Rental car insurance coverage

Rental car insurance coverage can at times be a complicated area for those looking to rent a car. Many car rental companies have their own regulations, rules, pricing, exclusions and offerings – and wading through all these to gain an understanding of what’s going on can sometimes be quite a task!

In essence, it is relatively straightforward. Many countries will have laws that mean a car on the road, rental or otherwise, must have certain minimum insurance. This minimum insurance is usually third party liability and this essentially means that if the renter has an accident that involves another party then the other party is covered by the renter’s insurance.

Many car rental companies will include in their basic rental price some form of insurance. At the very least this should be third party as described above, but many companies will also include additional insurance in their base price. This additional insurance typically will cover the rented car against some forms of damage and claims for things such as theft. It is possible that the rental company may also include what’s called CDW (collision damage waiver). This is a form of insurance cover that will protect the renter against some forms of collision damage to the rented vehicle.

It is important for a renter to understand that if they have an accident in the rented vehicle under circumstances not covered, or not sufficiently covered, by the insurance, then they will have to pay.

Circumstances whereby ‘gaps’ can arise in the rental company’s rental car insurance coverage are not unusual. One area of exposure is often the third part liability insurance. The insurance that comes as standard in the rental price may well be capped at a low maximum level of payout that could, in some circumstances, be insufficient – although in the UK the good news is that this cover is unlimited by law.

Another area of risk arises with exclusions under the CDW cover. Many car rental companies will exclude damage to certain areas of the vehicle from their insurance cover (e.g. wheels, tyres, roofs etc). If damaged, the renter will have to pay for these things and costs can be high.

Finally, it is worth examining the excess on the policy stated by the rental company. The excess is that proportion or amount of any claim that the renter will have to pay in the event of an accident or damage. Typically the amounts here can range between 500-1500pounds sterling.

If a renter is unhappy with these uncovered risks, then there are two things that can be done to increase cover.

Most car rental companies will offer ‘top-up’ insurance for a price. These top-ups can reduce the excess or increase liability cover but they may also prove expensive relatively speaking.

Another option is to purchase rental car insurance coverage from a specialist insurance company or broker – many of whom offer this type of policy online. It is often the case that the cover of these policies is superior to that of the car rental companies and the prices lower. This option may also be attractive because the policies are sold to an individual policyholder for a given period of time. In other words they are not restricted to a single car rental and will cover any vehicles rented in the period. The cost savings can be very significant – particularly for those that hire cars regularly.