A common cause of frustration and distress when renting a vehicle is dealing with insurance, starting with rental agents who are pushy in selling the company’s collision or loss damage waiver. But why are they so hell-bent on selling their insurance? This article answers that and discusses other nasty truths of car rental insurance that you need to know.

1. Car rental excess insurance from car hire companies is expensive and overpriced

Buying excess insurance at the rental desk is the most convenient way to protect yourself from having to pay a high amount in case of damage or theft of your rented vehicle. However, it is also the most expensive.

The car hire excess waivers usually cost $15-$30 or more per day —sometimes more expensive than the vehicle’s base rental rate. Meanwhile, the amount that the companies allocate for damages based on their risk experience is only around $4 per day. Needless to say, a huge chunk of the profits earned by rental companies come from selling their insurance, which explains the enthusiasm of the agents in pushing these waivers.

For a much cheaper alternative, you can use the excess cover that comes with your credit card or club membership (such as RACV in Australia). If you don’t have such perks, you can also just buy an independent car rental excess waiver insurance policy. Doing so won’t just save you a lot of money but will likely give you a more comprehensive coverage.

2. The sales tactics can get aggressive, even scammy

Smart customers who get excess insurance coverage from other providers are sometimes manipulated into getting the rental company’s policy instead. Manipulation techniques include lying to a customer — telling him that his car rental insurance provides insufficient coverage, or that his credit card deposit has been declined by the bank.

To be prepared for high-pressure selling, bring a printout of your car hire insurance policy. To avoid the credit card scam, bring a second credit card or call your bank to verify if the rental company really tried to present a charge and was declined.

3. There are many exclusions and extra fees

Despite the high price, car hire excess waivers often exclude a lot of things, such as single-vehicle accidents and damage to the roof, undercarriage, windshield, and tires. There are also fees that the customer must pay, such as towing fees and admin fees when you file a claim.

In contrast, many third-party insurance vendors cover such exclusions at no extra charge.

4. You may be liable for more than the excess

While the excess is usually considered the maximum amount you will have to pay in case of damage or loss of the rental vehicle, that is not always the case. In situations that are considered a breach of agreement, e.g. disobeying road rules or driving under the influence, you may have a much higher liability.

5. You may have to pay for damages upfront

If you use a third-party insurance (such as coverage from your personal insurance or credit card, or a policy you bought from an independent excess insurance vendor), you have to pay the rental company for damages upfront and it will be up to you to work with your insurance provider to get reimbursed for the expense. This is why many rental companies only accept credit cards that have a high limit.

6. Some rental companies may be difficult if you use third-party insurance

If your excess insurance is not from the rental company, the staff may be extra meticulous in inspecting the vehicle for damages when you return it. They may also not be very cooperative or forthcoming with credit card issuers or third-party insurance providers.

To counter this, be thorough in inspecting the car during pick-up. Make sure all damages you find are included in the company’s damage report. If you find any that is not on the list, have the staff add it. Also, take pictures or videos of the vehicle during your inspection so you have evidence in case you need to dispute any damages later on.

7. You may have to pay for “loss of use”

If the rental vehicle suffers significant damage while in your custody, the rental company may charge you to recover the potential revenue lost during the repair period, even if the firm has plenty of other vehicles available for rent. Worse, the charge is usually the full rental rate per day.

Bottom Line

There is a strong financial incentive for rental companies to push their insurance products to their customers. The 7 points discussed above are some of the unpleasant truths that you need to know before you decide where to buy excess insurance for a rental vehicle.