How to deal with insurance excess when renting a car abroad?

There’s a number of options, depending on your exact circumstances.

1. Your own car insurance.

If you own your own car, and it’s insured, then your insurance MAY cover you when you are in a rental car. Often there are fairly strict rules around what is covered, especially as you’re asking about overseas coverage which may often simply not be covered at all. Check your policy and/or call your agent/insurance company to find out exactly what is covered.

2. “CDW” or “LDW”.

Most rental companies will offer a “Collision Damage Waiver” or “Loss Damage Waiver” when renting the car. In effect, this “waiver” means that the rental company waives their right to charge you for any damage to the car when you return it (normally with exception related to you breaking the law, drink/driving, etc). Technically it’s not insurance, but the end result is basically the same. LDW/CDW is often very expensive, and in some cases can double or more the cost of the rental, but the coverage you get as a result is normally very good.

3. Travel Insurance

Many travel insurance policies will cover rental cars. Exactly what is covered will vary from policy to policy, so make sure you read the fine print – especially the different between “primary” and “secondary” coverage (more on that below).

4. Credit Card

SOME (but now days, far from all) credit cards have some form of coverage for rental cars when the rental car is charged to the card. Check the specifics on your card to see if rental insurance is included, and whether it’s secondary or primary coverage (most will be secondary). More and more only the higher level of cards are including this coverage (especially for MasterCard cards) so never presume that it’s included without checking!
If you do have coverage then you normally don’t have to do anything more than book/pay for the rental using the relevant card to be covered.

Primary v’s Secondary coverage

Most credit card coverage is what’s called “Secondary” coverage. This means that in the event of an accident you need to first claim against any other insurance you have available to you (eg, your personal car insurance policy, travel insurance, etc), and only if they do not cover the full amount are you able to claim against your credit card. This obviously could have implications when it comes to the renewal price for your insurance (just as if you’d had the accident in your own car), plus means that you need to file 2 claims to get paid in full.

Some credit cards offer “Primary” coverage, either by default, or more for an additional fee. eg, American Express call this Premium Car Rental Protection and it costs US$18-25 per rental (NOT per day!). The coverage is better than you’ll get with the default “secondary” coverage, but it’s normally only offered on some high-end cards and some “Business” cards (and then often only for business rentals), or at an extra fee such as with Amex.

If, by any chance, you are using an American credit card, auto insurance coverage is built in, for most cards. This benefit is offered by the company (Visa/Mastercard/etc.) and not the bank – so it will be prudent to check if this is offered in other countries too.

I was travelling in New Zealand, and we met with an accident (my fault). The insurance company did collect the excess on the spot (we didn’t have the waiver). Upon our return, I filed a claim – it took a ton of paperwork over numerous calls to New Zealand (for police reports, rental agreements, damage estimates, repair bills, etc.), but we finally got reimbursed. I was told that the insurance not only covers the excess and/or repair bills, but up to the complete replacement cost of the vehicle.

I think it very much depends on the country where you are renting the car from. In Europe the rental agency will always inform you what the excess is while picking up the car and they will give you the quote for the additional insurance. Certain online websites, e.g http://www.auto-europe.co.uk/ let you search for cars without excess, have their own excess protection plan, etc.

I am not aware how it works on other continents.

Most car rental companies offer a ‘waiver fee’ which essentially reduces your excess to zero. In North America it’s called Collision Damage Waiver (CDW). It’s going to cost you, and in the long run may not be worth it, but you should be able to get it. The exception will be if you are a young or inexperienced driver.