I’m Hiring A Car During My Holiday In Spain This Summer. Do I Have To Take The Rental Company’s Insurance? Robert, Leamington Spa

We’ve all experienced it. You arrive at the car hire desk after a long flight. You’re tired, confused, maybe dealing with someone who doesn’t speak English well. The person serving you fires off a series of questions about fuel, sat navs, child seats and insurance. You end up ticking all the boxes and signing the forms, only to discover when you get home that your car hire bill is double what you expected.

Competition is fierce among rental companies and, while hire rates can seem expensive, their margins are actually quite slim. That means many of them try to make extra profit by selling ‘add ons’ such as sat nav hire and insurance packages. The problem is trying to work out which of these you actually need and which you can buy beforehand.

Collision Damage Waiver Insurance (often written as CDW) covers the full market value of the hire vehicle if it becomes damaged or stolen while you’re hiring it. In Europe, this insurance is usually included as standard. But in other areas, particularly the USA and Canada, you may be required to purchase this cover separately and it’s often quoted as an optional extra. It’s important to check when you’re booking if this is part of the quoted price.

But there’s also another insurance product that’s usually offered when you arrive at the hire desk. You’re required to leave a deposit when collecting the vehicle – up to £2,000 taken on your credit card. This is to cover the ‘excess’ on the hire company’s insurance policy in the event of a vehicle loss. Excess Insurance essentially guarantees your deposit so you get it back if there’s a problem.

Hire companies often put a significant mark-up on the price of this. For example, excess insurance from a big hire company like Avis can come in at £30 a day in Europe while Hertz charge almost £200 a week. And Collision Damage Waiver in the US or Canada could set you back over $40 a day from Budget.*

The hire companies will often give the impression that you have to buy their insurance. This usually isn’t the case, especially in Europe, and specialist online insurance companies in the UK will offer you a daily, weekly or annual package covering a single hire or multiple trips in various regions of the world for a lot less than the hire companies.

For example Insurance4CarHire currently has annual excess cover for Europe starting at £40. And they offer annual CDW insurance for the USA at £109.* An insurance search site, like Confused.com, will show you more companies offering these products.

There could be other benefits of arranging your own insurance too. Basic hire company policies often don’t cover items such as tyres and windscreen breakages, whereas the specialist packages will include this in your annual cover. You can also add multiple drivers.

As always with insurance, you need to check the terms and conditions carefully to make sure it’s right for you. For example, some UK and European single hire insurance packages won’t cover cars hired within a certain distance of your home address, so they might no be suitable for a trip in your home country. You also need to report any accident to the local police and get good records for your claim – something all reputable hire companies will be able to provide.

*Prices correct as of August 2016

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