How does insurance work when renting a car?

Written by Jonathan Pearce

25 March, 2020

How does rental car insurance work?

Whether you’re renting, leasing or buying a car, not having insurance isn’t an option. Not only is it essential to have insurance to cover your expenses in the event of an incident, but it’s also a legal requirement in the UK. Driving without cover means you could be fined or disqualified from driving, with the potential to receive six to eight penalty points on your license. Not only that, but the police have the power to seize and destroy any car being driven in the UK without insurance.

When insuring a rented car, it’s important to note that policies work differently than when you’re insuring your own vehicle. In fact, some drivers assume that their personal policy covers them for driving any car, rental or otherwise, as it was a standard feature of most comprehensive car insurance policies up until a few years ago. Generally, comprehensive insurance only covers the car listed on the policy, with those that do cover other cars rarely extending the feature abroad or to hire cars.

Even if you think you’re clued up with insurance, you might find yourself wondering how insurance works when renting a car. Renting is different from leasing in that it’s over a short time period – but that doesn’t mean insurance isn’t critical. At AMT, we’ve put together a handy guide of everything you need to know when insuring a rental car to ensure we’ve got you covered.

How does rental car insurance work?

All rental cars have to have three types of cover in order to be on the road: damage cover, theft cover and third-party cover. When you hire a car, all car rental companies should provide you with basic insurance that encompasses the three types of cover required to drive in the UK – but it’s important to bear in mind that this might vary from country to country. Basic insurance consists of:

  • Collision Damage Waiver: Collision Damage Waiver (CDW) is a type of protection that limits how much a rental company will charge for repairs required to the car’s bodywork, meaning the most you’ll pay towards repairs is the excess. However, CDW only covers the bodywork, so any other damage sustained to the windows, tyres, chassis, engine or interior will require you to pay the full cost of repair.
  • Loss Damage Waiver: Loss Damage Waiver (LDW) works in the same way as Collision Damage Waiver in that it covers the cost of any loss to the rental vehicle – as long as you’ve adhered to the terms and conditions of the hire agreement. It generally covers things like theft, vandalism, fire and acts of nature that may damage the vehicle.
  • Third-Party Liability: Third-Party Cover relates to anyone else who may be in contact with the vehicle other than the insurance provider and driver. This is usually a member of the public who may make a claim against you in the event of an injury or property damage. Third-Party Liability may payout to cover your legal expenses as well as the compensation payment, depending on your policy.

All cover provided with the hire car should be good for the length of the rental car period. Most providers will let you extend the cover if you need to use the rental car beyond the agreed return date, but this depends on the terms and conditions in the agreement. You may also be offered extra cover for any injury to you or your passengers when renting the car, badged Personal Accident Insurance (PAI). However, this isn’t a necessity unless you feel you’d benefit from further cover.

As the standard CDW/LDW policies don’t cover other vulnerable parts of the car aside from the bodywork, you may want to consider a car hire excess policy that covers the entirety of the vehicle. Car hire excess insurance is designed to cover excesses of up to £10,000 that aren’t handled with a traditional rental policy and can be bought either as a single or annual policy.

How does rental car insurance work?

If you’re hiring your car from a reputable provider, you’ll generally be getting a good price. However, there are other ways to get cover that can prove more cost-effective if you suspect you’re being overcharged. These include trying a third-party broker, which can make price comparison easier for comprehensive cover as you can look at multiple firms on one site. Some brokers may have special deals with their suppliers, so beware – while this can result in highly competitive prices, it could also mean you’re being pushed into using an insurance company based on a partnership rather than a good deal.

You should also check the fuel policy, as while picking up the car with a full or half-full fuel tank is generally the best option when it comes to economy, some providers may ask you to pay for a full tank and return it empty with no refund or discount for unused fuel. Also bear in mind your age – some car hire companies will charge a premium for renting to drivers under 21, and many high-performance cars will be restricted to those over 25.

To summarise, some ways you could save money on your rental insurance include:

  • Checking insurance comparison sites for the best deals
  • Knowing what insurance you need so you don’t pay for extras
  • Checking the fuel policy
  • Book your rental car as early as possible
  • Check age restrictions (under 21, over 25, over 70)
  • Check whether you’ll be charged extra for sat nav
  • Check for mileage limits

Of course, it’s always recommended to double-check the small print at the bottom of your insurance policy so you know exactly what you’re paying for. To help you think of what makes a good level of cover for your rental car, you need to ask yourself what you’ll be using the vehicle for and whether you’re likely to require additional cover as a result – particularly if you’re going to be towing or transporting high-value personal items.

At AMT, we’re advocates for safe and responsible rental car use and pride ourselves on providing a service that’s tailored to you. If you want to find your ideal rental car, contact our dedicated team today to discuss your requirements.

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