Car hire excess insurance in Australia
In Australia the hire company's own damage cover is typically part of the rental rate (Hertz, for example, includes collision damage waiver), but you stay liable for an excess if the car is damaged or stolen, which Hertz calls the Loss Damage Liability. You can lower that amount at the counter, or buy separate excess cover or a travel insurance plan that reimburses it afterwards. The catch: the rental company still charges you first, and Hertz's counter products and the standalone policy described here do not pay when the damage comes from a use the rental agreement prohibits, such as unsealed roads, beaches or striking overhead objects.
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Key facts
- What the rental rate includes
- For example, Hertz says collision damage waiver is included in the rental rate and limits your liability to the Loss Damage Liability amount shown on your rental agreement
- Ways to reduce the excess at the counter
- For example, Hertz sells Optional Renter Protection Services that reduce the Loss Damage Liability, and says they are not insurance policies
- Who you pay first
- For example, Hertz says that if you buy excess waiver insurance from a third party you remain liable to pay Hertz whether or not your insurer reimburses you
- Prohibited use voids cover
- For example, under Hertz's terms undercarriage damage, damage above the windscreen line and driving on a flat tyre are Prohibited Uses, and liability is then not limited
- Standalone excess policy (one example)
- Car Hire Excess reimburses the excess or repair cost, whichever is less, with a total claim limit of $4,000 to $8,000 chosen at purchase, and the Australia only plan is open to drivers of any residency
- Standalone policy exclusion
- That policy will not pay a claim arising from using the rental vehicle in violation of the rental agreement, and it must be bought before you collect the car
- Travel insurance (one example)
- Allianz includes Rental Vehicle Excess cover in its Comprehensive, Multi-Trip and Domestic plans, and it applies only if you are a nominated driver on the rental agreement
- Travel insurance limits (one example)
- Cover-More lists a rental vehicle excess benefit of $5,000 on Domestic Comprehensive and Inbound plans and $10,000 on Domestic Comprehensive+, and none on Domestic Basic; it applies only to the nominated driver and requires comprehensive motor vehicle insurance for the rental car
Do I need rental car insurance in Australia?
You do not have to buy anything extra to be allowed to drive away, because the basic damage cover is part of the rental. Hertz, for example, states that collision damage waiver is included in the rental rate and that if you use the car in line with the agreement the most you pay is the Loss Damage Liability per incident, printed on your rental agreement. Moneysmart defines an excess as the amount of an insurance claim that the consumer has to pay, and the Loss Damage Liability plays that role in a rental: a dollar figure you can be charged.
The question is therefore whether you want to shrink the excess. The rental agreement shows the amount and whether any protection package was accepted or declined, so read that line before you sign.
What is the difference between excess reduction, standalone excess cover and travel insurance?
Counter excess reduction is sold by the hire company and lowers the liability you owe that company. Hertz calls its version Optional Renter Protection Services, says it is not an insurance policy, and notes that not every location offers every option. It reduces the Loss Damage Liability that Hertz can charge you, rather than paying you back afterwards.
Standalone excess insurance and travel insurance work the other way round: you pay the hire company, then claim the money back. The standalone policy's disclosure statement says it does not replace the rental company's cover and only reimburses the excess, up to a chosen limit. Allianz and Cover-More each include a rental vehicle excess benefit in some travel plans, and both require you to be a nominated driver on the rental agreement. Cover-More also requires comprehensive motor vehicle insurance for the rental car for the hire period, which is the cover in the rental rate, and Allianz requires the rental agreement to state a maximum amount you must pay if the car is damaged or stolen.
- Counter reduction: lowers what the hire company can charge you.
- Standalone excess cover: reimburses the excess after you have paid it.
- Travel insurance benefit: reimburses the excess, but only on plans that include it, up to the plan's limit.
What does the hire company charge you first, and what do outside policies pay back?
Hertz's terms say that, if you did not buy its optional protection that reduces the Loss Damage Liability, in an incident involving a third party or theft it will charge your card at the Loss Damage Liability level while it investigates, and refunds the difference later if the assessed damage is lower or you are found not liable. Its terms also say that buying third party excess insurance does not change this: you pay Hertz, then chase your insurer. Have a card with room for that hold.
Outside policies reimburse the lesser of the excess or the repair cost. The standalone policy also says it reimburses charges for damage to windscreens and auto glass, roof, tyres and underbody. Whether a hire company treats that damage as covered at all is a separate question, dealt with below.
What do excess policies not cover?
The pattern across the documents is the same: cover follows the rental agreement. The standalone policy will not pay a claim that arises from using the vehicle in violation of the rental agreement, or while affected by alcohol or drugs. Hertz's Prohibited Uses include undercarriage damage, damage above the windscreen line such as hitting a tree or a low car park roof, driving on a flat tyre, ignoring a warning light, putting the wrong fuel in, and leaving keys in the car or windows open. If a prohibited use causes the loss, Hertz says your liability is not limited and its protection services are void.
Two consequences follow. A policy that reimburses underbody damage may not help if the hire company has already classed that damage as a prohibited use, because the claim can then arise from a breach of the agreement. And travel insurers add their own exclusions on top, so read the product disclosure statement for your plan rather than the marketing page.
- Driving on unsealed or prohibited roads or on beaches is a rental agreement question first; Hertz's terms list prohibited roads by name and also treat driving on a beach or on unsealed roads (with limited exceptions) as outside the agreement.
- Personal belongings in the car are not covered by Hertz's protection services.
- Traffic and parking fines are excluded from Hertz's protection services and are charged to your card.
Is car hire excess insurance worth it, and can I buy it as an Australian resident?
It is worth comparing when the excess on your rental agreement is high, or when you already hold a travel plan that includes the benefit. Car Hire Excess says the excess charge is often upwards of $3,000 for a standard car and up to $8,000 for campervans and motorhomes, so check your own rental agreement for the real number. If your travel plan already includes rental excess cover, a second policy adds little, and the standalone policy's terms say a claim paid under one policy cannot be claimed again under another.
Residency depends on the product. The Australia only plan of the standalone policy is available regardless of country of residence, but its worldwide plan requires you to be domiciled in Australia. Travel plans have their own eligibility rules, and Cover-More lists a separate Inbound plan. Cover for drivers is limited by age too: the standalone policy covers nominated drivers aged 21 to 75.
What to check before you collect the hire car
Buy any outside policy before pick-up: the standalone policy's cover begins when you collect the vehicle and it must be bought before then. Make sure every driver who might drive is nominated on the rental agreement, since all the documents above cover only nominated drivers.
At pick-up, note the excess figure and the list of prohibited roads in the rental agreement, and photograph existing damage. Hertz also says that if you notice a windscreen chip within 60 minutes of leaving its location, you should take a dated photo and show a staff member when you return the car. If your route includes ferries, unsealed roads or snow, check those terms against your trip before comparing insurance, because they decide whether any cover applies.
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Prices are shown in Australian dollars. Check the pickup point and what the agreement allows on the roads in this guide before you book.
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Questions people ask
Do I need rental car insurance in Australia?
Basic damage cover is often part of the rental rate, with your liability capped at the excess on the rental agreement. Hertz's Loss Damage Liability is an example. Extra excess reduction or a separate excess policy is optional.
What is car hire excess insurance in Australia?
It is a policy sold separately from the hire company that reimburses some or all of the excess you are charged if the rental car is damaged or stolen. You pay the hire company first and then claim.
Does travel insurance cover rental car excess?
Some plans do. Allianz includes Rental Vehicle Excess cover in its Comprehensive, Multi-Trip and Domestic plans, and Cover-More lists a benefit on its Comprehensive, Comprehensive+ and Inbound plans (Domestic and International Basic have none), each up to a benefit limit and only for a nominated driver. Basic plans may have none.
Can visitors buy car hire excess insurance for Australia?
Yes for some products. One standalone excess policy's Australia only plan is available irrespective of country of residency, while its worldwide plan needs an Australian domicile. Check the eligibility section of the product disclosure statement.
Does excess insurance cover damage on unsealed roads?
Not if the rental agreement prohibits the road. A standalone excess policy will not pay claims arising from breach of the rental agreement, and Hertz treats a Prohibited Use as voiding its protection services.
Is car hire excess insurance worth it?
It depends on the excess in your rental agreement and whether your travel plan already includes the benefit. Compare the excess, the policy limit, the exclusions and what you would pay upfront.