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Excluding Tasmania, the Australian car rental industry is one of the least regulated, with many an unsuspecting consumer unaware of the potential pitfalls. While it's common for most car hire companies to charge for insurance as part of the rental deal, it's difficult to compare insurance fine print and prices before you are required to sign on the dotted line. Policies vary a great deal, and the issue of paying an excess is one area of great contention.
Vehicle excess: excessive?
If you have an accident while driving a rental car the excess you will have to pay can be very high if you opt for the cheapest possible insurance. All of a sudden, cheap is not quite so cheap anymore!
Take the example of Suzanne. Suzanne went on a summer trip up the coast with a few friends last year and was shocked at how much the insurance raised the cost of the car hire fee. She wanted to take out the cheaper insurance, but her sister insisted they take the more expensive policy with a lower excess.
Not too long into their journey, they had to brake suddenly at some notorious traffic lights near Newcastle. The driver behind them, failing to stop in time, crashed into their hire car, causing major damage to the rear.
Two hours of their trip was spent filling in paperwork and picking up a new car, only to find on their return to Sydney that they had been charged the $800 excess fee, even though the accident wasn't their fault.
The driver at fault was not insured and, as a result, the group of travellers were not refunded for the cost of the excess. (They didn't read the fine print). However, it could have been much worse. If Suzanne's sister had not insisted on the higher insurance premium, they would have been more than $2000 out of pocket. Visit CHOICE for more case studies and information.
While most private comprehensive car insurance policies will cover you in the case of damages caused by an uninsured driver, it does not generally extend to hire car excess.
Excess insurance: insuring your insurance
While it may not be possible to pick and choose between policies when taking out insurance on a rental car, there is an increasingly large variety of ways in which you can cover the excess. Some credit cards will automatically include excess cover as part of their service so check with your bank first. One catch, however, is that the excess will have to be paid first and then reimbursed later meaning that upfront you will still have to bear a heavy financial burden for the accident.
Most insurance companies offer excess cover policies, often at a reasonable rate. One policy with RACV charges $134 for cover of a $4000 excess if the driver is aged 21-24 years, or $80 for people more than 25 years. As most excess reductions offered by car hire companies can be around $20 per day, excess cover insurance could work out much cheaper.
