Does Travel Insurance Cover Car Rental? What Australians Need to Know

Planning a road trip along the Great Ocean Road or exploring the winding roads of the Alps overseas? Renting a car can give you the freedom to explore destinations at your own pace, but that freedom can also come with potential financial risks.

Many travellers know that travel insurance covers things like lost luggage and flight cancellations, but can it also cover car rental as well? In many cases, comprehensive travel insurance may include a lesser-known benefit known as a Rental Car Excess Waiver. This benefit can help reduce out-of-pocket costs if you are charged an excess, subject to the terms, conditions, and exclusions in the PDS.

So, what exactly is a Rental Car Excess Waiver? And how does travel insurance help cover it? Let us break down what a Rental Car Excess Waiver is, what may be covered, and the common limitations to keep in mind before hitting the road on your next holiday. 

Understanding Rental Car Excess Waiver and Your Liabilities

Whenever you hire a vehicle, whether overseas or domestically, the vehicle typically comes with insurance from the rental company. This benefit provides cover for the excess that is required to be paid for this excess in the event of a covered claim.

Put simply, the Rental Car Excess Waiver is a benefit included in some travel insurance policies that may reimburse you for the excess amount you’d have to pay if your rental car is involved in an accident, is damaged or is stolen while in your care. This amount, called an excess, is what the rental company charges you before their insurance covers the rest.

This excess can be significant, commonly ranging between $4,000 and $8,000, depending on the rental company, vehicle type, and location. Insure&Go policies may reimburse up to $4,000 (Silver) or $7,500 (Gold) for Domestic travel, and up to $4,000 (Silver) or $8,000 (Gold) for international travel, subject to policy terms and limits.

For premium or luxury cars, the excess amount you could be charged can climb even higher. Even for something minor, like a scratched bumper or cracked windscreen, you might still be charged the full excess, as it’s a fixed amount under the rental company’s insurance. Some rental companies may automatically charge the full excess upfront, depending on their terms and conditions, after an incident and refund the difference later once the final repair costs are confirmed.

This is why it’s important to understand your liability when renting a vehicle before you drive away.

The Role of Travel Insurance in Covering Rental Car Excess Waiver

Many comprehensive travel insurance policies may include a Rental Car Excess Waiver benefit within their policies. This means that if you rent a car while travelling and it’s involved in an accident, or is damaged or stolen while in your care, your travel insurance may reimburse you for the excess amount charged by the rental company, up to the limit specified in your policy.

It’s important to note that travel insurance does not replace the rental company’s insurance, nor does it remove your obligation to follow their terms and conditions. Instead, it may reimburse you for the excess, which is the out-of-pocket amount you’re responsible for under the rental company’s insurance in the event of a claim.

Depending on your policy and level of cover, this benefit may apply to both domestic and international rentals. It can cover a range of incidents, including collisions, theft, and damage caused by weather or vandalism, subject to the terms of your travel insurance and the rental agreement.

Having this cover in place means you could reduce the need to purchase the often-expensive excess reduction add-ons offered by the rental car company. However, it’s essential to always check your travel insurance policy and the rental company’s terms to understand what’s covered and what your responsibilities are.

What Does Travel Insurance Typically Cover Under Rental Car Excess?

Travel insurance policies that include a Rental Car Excess Waiver are designed to help reduce out-of-pocket expenses if something goes wrong with your rental vehicle.

Here’s what’s typically covered under this benefit:

• The Excess Amount: If your rental car is involved in an accident, stolen, or damaged (even if you weren't at fault), the rental company may charge you an excess. Travel insurance may reimburse you for that amount, which can often be coverage up to $4,000 to $8,000, depending on the level of cover you choose. 
• You’ll want to check your policy to ensure the limit matches the potential excesses charged by rental car companies in your chosen travel destination.
• Damage from Accidents: Whether it’s a minor scrape or a more major collision, if the vehicle is damaged and you’re charged an excess, your travel insurance may help reduce the cost.
• Theft of the Vehicle: If your rental car is stolen and the company charges you the applicable excess, this amount may be reimbursed by your insurer.
• Weather-Related or Vandalism Damage: In some cases, Rental Car Excess Waiver cover may also apply to excess charges caused by events such as hail, floods, or malicious damage. However, coverage depends on the rental company’s insurance terms and conditions. Travellers should carefully read their hire vehicle agreement to understand what types of damage are covered and when excess charges may apply.

Insure&Go’s Bare Essentials travel insurance policies do not include the Rental Car Excess Waiver benefit, while this coverage is included with our Silver and Gold Policies. 

Domestic Gold policies also come with an additional protection relating to rental cars, known as Return of Rental Car Cover. This cover may provide reimbursement up to $750 towards returning the vehicle to the nearest depot if a doctor certifies that you are unfit to drive the vehicle while travelling, subject to policy terms, conditions, limits, and exclusions.

What Isn't Usually Covered by Travel Insurance for Car Rentals?

While the Rental Car Excess Waiver is designed to offer financial help with excess charges, it’s important to understand what isn’t covered. Like any insurance benefit, some exclusions and conditions may limit your ability to make a claim.

Here are some common exclusions found in most travel insurance policies:

• Reckless or Dangerous Driving: If you were driving carelessly, speeding excessively, or ignoring road rules, your claim may not be paid.
• Driving Under the Influence: Any incident that occurs while you’re under the influence of drugs or alcohol is excluded from cover.
• Driving on Unsealed or Restricted Roads: Unless your rental agreement explicitly permits such driving, damage that occurs while driving off-road or on unsealed roads may not be covered.
• Third-Party Liability: Travel insurance usually does not cover damage to other people’s vehicles or property, or injuries to others. This type of liability is typically already covered by the rental car company’s insurance.
• Rental Agreement Violations: Claims may not be paid if they arise from a breach of your rental agreement. This could include failing to report damage promptly or ignoring usage restrictions.
• Excess-Only Coverage: The Rental Car Excess Waiver only applies to the excess amount charged under the rental agreement. It does not include coverage for additional fees such as loss of use, towing, administrative charges, or repairs beyond the excess.
• Unauthorised Drivers: The Rental Car Excess Waiver only applies if the driver is both listed as an authorised driver on the rental agreement and named on the travel insurance policy.
• Excluded Vehicle Types: Some vehicle types are not commonly covered under the Rental Car Excess Waiver benefit, including but not limited to commercial vehicles, buses, minibuses, trucks, full-size vans mounted on truck chassis, campers, motorhomes, trailers, motorbikes, motorcycles or mopeds and any other vehicle having fewer than four wheels, and limousines.
• Illegal Acts and Intentional Damage: If damage or an incident arises from an illegal act, or was intentional or non-accidental, coverage will not apply.

For full details of the benefits, terms and conditions, limits, sub-limits and exclusions that may apply, please refer to the relevant Combined Financial Service Guide and Product Disclosure Statement (PDS).

Benefits of Using Travel Insurance for Rental Car Excess Waiver (Compared to Rental Company Insurance)

Rental car companies also usually offer excess reduction or damage waiver insurance. While this may seem like a convenient option, it can be more expensive and may not include the additional benefits available through comprehensive travel insurance policies that include a Rental Car Excess Waiver.

Travel insurance policies that include this benefit may help reduce out-of-pocket costs for excess charges, subject to the terms, conditions, and exclusions in the PDS. For example:

• Cost Savings: Rental companies may charge high daily charges for their excess reduction options. Over a two-week rental, this can add hundreds of dollars to your trip. Travel insurance with the Rental Car Excess Waiver benefit typically involves just a one-off premium and may cover many other aspects of your trip beyond just coverage for your rental car excess.
• Broader Coverage: Travel insurance policies may include cover for overseas medical treatment, trip cancellation or delays, lost or delayed luggage, and more, alongside the Rental Car Excess Waiver.
• Coverage Limits: Many travel insurance policies offer a Rental Car Excess Waiver that can provide cover up to $4,000 to $8,000, which can often be higher than what may be offered through car rental companies. That may give you added peace of mind in the event of serious damage or theft.
• Policy Transparency and Support: Travel insurers typically provide detailed policy wording, 24/7 customer support, and regulated claims processes. This can help travellers understand their entitlements and access support when needed.

Key Things to Look for in a Travel Insurance Policy that Includes Car Rental Protection

It’s important to choose a travel insurance policy that offers the protection that aligns with your personal needs and expectations, and without any surprises. Not all policies are created equal, and understanding the fine print can make all the difference when things don’t go to plan.

Here are some factors Australians may wish to check when comparing travel insurance policies for car rental protections:

• Maximum Excess Covered: Make sure the policy covers a sufficient excess amount since Rental Car Excess Waivers in Australia and overseas can vary widely. If you’re renting a higher-end vehicle, check that the policy limit matches or exceeds the potential charge.
• Domestic and International Coverage: Some travel insurance policies only cover international travel and rental cars hired abroad, while others may be dedicated to domestic travel and vehicles rented within Australia.
• If you’re planning a road trip within Australia, ensure your policy explicitly includes domestic coverage, making sure to check if there are any rental period limits (for example, up to 22 consecutive days for Domestic policies and 36 consecutive days for international policies).
• Vehicle Type Restrictions: Most policies exclude certain vehicle types. Always check the eligible vehicle types under your policy to ensure your rental is covered, since vehicles like motorhomes, campervans, or commercial vehicles are not likely to be covered. 
• Rental-Related Exclusions: Review the section of your travel insurance policy that relates to Rental Car Excess Waiver and check the section-specific and general exclusions, such as unauthorised drivers not being covered, driving on unsealed roads, or breaches of the rental agreement terms. 
• Expenses Are Covered: In some cases, travel insurance policies may only reimburse the rental excess itself and not any additional costs, such as rental company administration fees, towing, or roadside assistance fees you may have incurred. 

Does the Driver Need to Be Specifically Named on the Travel Insurance Policy?

In most cases, travel insurance that includes Rental Car Excess Waiver protection may provide such coverage to a driver involved in an incident that is:

• Listed as an authorised driver on the rental agreement, and
• Named or included as an insured traveller under the travel insurance policy.

In most cases, each authorised driver does not need a separate policy, provided they are listed under the same travel insurance policy. For example, if you’ve taken out a policy that covers yourself and any travel companions or family members, and one of them is also listed as an authorised driver on the rental agreement, they may be covered for cover under the Rental Car Excess Waiver benefit.

All insured drivers must be named or included in the travel insurance policy. If someone drives the car but isn’t included in your policy, they may not be covered for rental excess claims. Similarly, if someone drives the car without being listed as an authorised driver on the car rental company contract, the claim may be denied even if they are listed on your travel insurance policy. 

How to Make a Claim for Car Rental Excess with Travel Insurance

If your rental car is damaged or stolen during your trip, you may be able to claim the excess charged by the rental company, provided your policy includes a Rental Car Excess Waiver.

To support a Rental Car Excess Waiver claim, it is important to keep copies of all documents related to the rented vehicle and any incidents that occur. Claims are subject to the terms and conditions of both the rental agreement and the travel insurance policy. Timely reporting and submission of claims, typically within 30 days, can help ensure your claim is assessed without delay or complications.

Step-by-Step Guide to Making a Claim:

1. Notify the Rental Car Company Immediately
   Report any incidents relating to the vehicle to the car rental provider as soon as possible. They may ask you to complete an incident or damage report and may advise you on what documents they’ll need from you. 
2. Request All Relevant Documentation
   To support your travel insurance claim, you’ll typically need to gather several documents, including:
   - A copy of your car rental agreement
   - Showing the excess terms and listed authorised drivers.
   You may also need:
   - A damage or incident report from the car rental company
   - An invoice of charges that includes the excess that was charged to you
   - Proof of your payment for such invoices
   - A police report (if applicable, e.g. theft, vandalism, or major accident)
3. Collect Supporting Travel Insurance Information
   Make sure you have a copy of your travel insurance policy that includes your policy number, the names of all travellers listed and covered on the policy, and your current contact details for correspondence. 
4. Submit Your Claim Promptly
   Most insurers require you to submit a claim within a set timeframe, usually anywhere from 30 to 60 days from the incident. Claims can typically be submitted online, by email, or by post. Online portals often allow you to upload documents directly.
5. Await Assessment
   After submitting a claim, your claim will then be assessed. During this period, you may be contacted and asked to provide additional information if anything is missing or unclear. If approved, you’ll be reimbursed up to the rental vehicle excess or policy limit, whichever is lower, for the covered amount.

Standalone Rental Car Excess Insurance vs Travel Insurance Cover

There is the option of simply purchasing standalone rental car excess insurance as opposed to going with such protection included under a comprehensive travel insurance policy that includes a Rental Car Excess Waiver.

Standalone rental car excess insurance may offer higher excess limits or cover certain vehicle types that aren’t always included in travel insurance. However, it typically does not include other travel-related protections such as overseas medical expenses, trip cancellations, delays, or lost baggage.

Comprehensive travel insurance provides coverage for a long list of other travel-related risks beyond just Rental Car Excess Waiver, including needing overseas medical treatment, experiencing trip cancellations and delays, and dealing with lost baggage. Standalone rental excess insurance does not include any of these additional protections.

Standalone insurance also usually needs to be purchased separately for each trip, something that may be avoided by purchasing an Annual Multi-Trip Travel Insurance policy. You also don’t usually benefit from the same high level of claims support or service infrastructure as offered by well-established travel insurers.

In contrast, comprehensive travel insurance with car Rental Excess Waiver Cover may provide broader financial support for many Australian travellers, compared to standalone options, depending on your needs. This could be particularly useful if you’re heading overseas or planning multi-leg trips. 

You get the convenience of having all the added support you may need while travelling, all bundled into one easy-to-manage policy, which is backed by a reputable travel insurer.

Insure&Go offers policies that include a Rental Car Excess Waiver benefit along with other travel-related benefits. For full details of the benefits, terms and conditions, limits, sub-limits and exclusions that may apply, please refer to the relevant Combined Financial Service Guide and Product Disclosure Statement (PDS).

These policies may provide cover for a Rental Car Excess Waiver benefit up to the applicable policy limits, as well as other features depending on the level of cover selected. Our comprehensive travel insurance policies are designed to support you wherever the road takes you.