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Car Hire Insurance Explained - Money Expert

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Last updated: 05/06/2024 | Estimated Reading Time: 4 minutes

When you're renting a car, at home or abroad, there's often a lot of paperwork to deal with, and hidden fees tucked away in the small print that you'll want to be careful to avoid. In and amongst all this, it can be easy to forget about insurance. What cover do you need to take out on a rental? And what comes included? We'll go over everything you need to know in this guide.

In This Guide:

Does Car Hire Include Insurance?

When hiring a car, all rental companies should provide you with third party cover as standard. However, many vehicles also come with a CDW or LDW for extra protection, while breakdown cover usually has to be purchased separately as an extra if you want it.

Here is some more information on the types of insurance typically included with a rental car:

Third Party Insurance

Third party cover, also known as supplemental liability insurance (SLI), will cover the cost of repairing any damage to another driver’s car should you be in an accident as well as compensation for injuries they may sustain.

In the UK and many other European countries, third party cover is nearly always paid for by the rental company. However, if you’re travelling in America or Canada, third party cover may not be provided as standard. Always check your agreement carefully before assuming you’re protected.

Collision Damage Waiver (CDW) and Loss Damage Waiver (LDW)

Usually, car rental agreements also have a damage waiver - either collision (CDW) or loss (LDW) - included, and this functions similarly to standard car insurance in that you're covered for damage to the vehicle itself, not just other people’s property. The damage waiver is usually limited to certain types of damage, however (it might not cover damage to tyres, for example), and any claims will be subject to excess.

Both CDW and LDW work in a very similar way, but the key difference is that CDW only covers you for collision-related damages, while LDW covers you for both these damages as well as loss of the rental vehicle (if it was stolen, for example).

What Is Car Hire Excess Insurance?

Any cover you do get with your rental agreement will usually be subject to an ‘excess’. This means that you have to pay a contribution towards the repair of the vehicle, no matter who is at fault. This can be as high as £2,000, so it is essential to understand what you are liable for before you take out a policy.

Car hire excess insurance, sometimes simply called car hire insurance, will cover you for that excess, as well as for any additional types of damage to the vehicle that the basic policy doesn't. This can include things like damage to tyres or windscreen. Car hire excess insurance is in some ways closer to travel insurance than to car insurance, since you can buy it to cover the period during which you've got your rental, or as an annual policy, which can be a good idea if you rent cars frequently throughout the year. 

Do I Need Car Excess Insurance?

As with most types of insurance, you don’t have to get it if you don’t want to. But with a car hire excess policy, you can pay a small fee to avoid paying a larger one. Often, with the basic insurance provided, you won’t be covered for things such as broken windscreens or tyres, which can easily be damaged.

How Do I Find the Best Deal on My Car Rental and Car Insurance?

Renting a vehicle, and the car insurance that comes with it, is like any other purchase - the more research you do the better. There are a few key tips when it comes to renting that you should bear in mind:

  • Avoid renting at the airport: When renting directly at the airport, they know that they are your only option, and are often encouraged to put on as many extra fees as possible
  • Search the internet: Do not take the initial price you have been quoted as the final one. There are always coupons and codes available that can make it cheaper.
  • Prepaid rental: Although much cheaper, they are inflexible and will not allow you to change if your plans change so you could lose out on money if you pay too early

Start Your Car Rental Insurance Journey Today

Whether you’re looking for long-term car hire excess cover or a one-off car hire insurance policy for a single trip, it’s important to start your research sooner rather than later. Familiarise yourself with local regulations if travelling abroad and read your car rental terms and conditions carefully to make sure you know exactly what you’re covered for.

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