Car hire insurance: what’s really worth it

Insurance for a hire car can cost a few euros, but it can also cost more than the hire itself. The cheapest offer may therefore not necessarily be the best value for money in the end.

You’ll most commonly come across three options:

insurance directly from the car hire company
external insurance offered by an aggregator, such as Booking.com
your own external insurance arranged separately

However, options 2 and 3 are essentially one and the same – they are both forms of external insurance that have nothing to do with the car hire company itself.

All three options can cover similar types of damage. However, they differ significantly in terms of price, the amount of the excess and, most importantly, what happens if the car is damaged.

Compare car hire prices on Booking.com

Which car hire insurance is best?

There is no single best option for everyone.

Coverage directly from the car hire company is usually the most convenient, but also the most expensive.
External excess cover is usually cheaper, but you’ll typically have to pay the rental company for the damage first and only then claim reimbursement.
Hiring a car without additional cover costs nothing extra, but you risk losing the full excess.

When making your decision, don’t just look at the price of the insurance.

The amount of the security deposit, the list of exclusions, and whether you would be able to pay several hundred or thousand euros out of your own pocket in the event of damage are also important factors.

Two basic types of insurance

Option	What happens in the event of a covered claim	Excess	Price
Cover provided directly by the rental company	the rental company does not charge for the damage or charges only a reduced excess	lower	usually the highest
External insurance	The rental company charges for the damage and the insurer subsequently reimburses you	High	usually lower
Without additional cover	You pay for the damage up to the basic excess	High	No extra charge

It doesn’t matter whether you purchase external insurance via Booking.com, from a specialist insurer or as part of another product (such as your bank card, etc.)

From the car hire company’s perspective, this is still third-party insurance, which does not alter the terms of your hire agreement.

Excess and security deposit are not the same thing

When hiring a car, these two amounts are often confused. And it’s important to clarify this right from the start.

Excess

Excess is the portion of the damage that you are responsible for paying yourself.

If the excess is 1 000 eur, the car hire company may claim up to 1 000 eur from you for any damage covered by the policy.

The amount of the excess varies depending on the individual car hire company and the location where you hire the car.

I have encountered excesses of 500 eur, but also 3 000 eur. Most commonly, it ranges between 1 000 eur and 2 000 eur.

Security deposit

A security deposit is an amount blocked on your payment card.

It serves as a guarantee, for example, against damage to the car, missing fuel, fines, late return or lost keys.

The security deposit may be lower than, equal to or higher than the excess.

External insurance does not usually reduce the security deposit. Cover provided directly by the rental company may reduce it, but this must always be stated in the terms and conditions of the specific offer.

If you return the car without any issues, the security deposit will be refunded to you – usually within 7–10 days.

1. Cover provided directly by the car hire company

When booking or collecting the car, the rental company will usually offer you the option to reduce the basic excess.

The excess is the amount you pay in the event of damage to the car.

These products may have different names:

Super CDW
Super Cover
Full Cover
Premium Protection
Excess Reduction
Zero Excess

This isn’t always standard insurance.

If you purchase a zero excess package directly from the car hire company, the company will not usually charge you for any damage covered by the policy.

So you don’t have to:

pay for the damage yourself first,
obtain a final invoice,
submit a claim to another insurance company,
wait for a refund.

However, you must still comply with the rental terms and follow the correct procedure in the event of an accident.

Advantages of taking out insurance directly with the car hire company

The main advantage is that communication is much easier.

The simplest way to settle a claim

If the damage is covered, you usually only need to deal with the hire company. You do not need to subsequently prove your claim to an external insurer.

You usually do not have to pay for the damage upfront

For example, you do not need to have 1 500 eur available to pay the excess and then wait several weeks for it to be reimbursed.

The security deposit may be reduced

If you purchase the highest-level cover package, the car hire company may reduce the amount blocked on your card.

This isn’t an automatic rule, but it is common practice for some companies.

Less pressure at the counter

The car hire staff will see that you have their own product and won’t try to persuade you that your external insurance ‘isn’t valid’ with them.

Disadvantages of insurance directly from the car hire company

High cost

Comprehensive cover can cost more than the hire itself.

A typical example is a car offered at 15 eur per day, to which the rental company adds zero excess for a further 25 to 40 eur per day.

For a weekly hire, you’ll end up paying significantly more for the cover than for the car itself.

Package names are not standardised

Full Cover, Premium Protection and Zero Excess do not all offer the same cover.

Always check:

the final excess amount
which parts of the car are covered
the amount of the security deposit
administrative fees
exclusions

For example, on my last trip to Mexico, I paid extra for insurance with America Car Rentals that claimed to cover absolutely everything with zero excess.

In the end, however, it was only at the counter that I realised it didn’t cover damage to the wheels, chassis or windows, which is usually the main problem.

I know it’s a bit of a bore. But here, more than anywhere else, it really does pay to read the full terms and conditions of the insurance.

Zero excess does not mean absolutely zero risk

Cover may cease to apply, for example, in the event of:

driving under the influence of alcohol
driving by a person not named in the policy
driving off authorised roads
crossing borders without the rental company’s consent
failure to report an accident
gross negligence
loss of keys
filling up with the wrong fuel

Some packages do not cover damage to the interior, special cleaning or costs arising from a breach of contract.

When is it worth taking out cover from the car hire company?

We would opt for it particularly if:

you’re only renting a car for a short period
you do not want to pay anything up front in the event of damage
you do not have a sufficient credit limit on your card
you’re hiring a more expensive car
you don’t want to deal with an insurance claim after returning home
you’ll be driving in heavy traffic or on poor-quality roads
you’re hiring a car in a country where it might be difficult to source sufficient cover for your external insurance

For a short-term hire, the higher price may be acceptable. For a two-week trip, however, the difference between the hire company’s cover and third-party insurance is usually significant.

Personally, I tend to pay extra for cover through the car hire company in countries I’m not very familiar with, where I don’t know how the bureaucracy works, and also where I feel there’s a higher risk of an accident.

Typically, this means in less developed regions, in some southern European countries, and so on.

I’ve described my experiences of driving and hiring cars in several articles: For example:

2. External excess insurance

External insurance is not provided by the company renting you the car.

The car hire company therefore acts in accordance with its own hire agreement, regardless of whether you have insurance elsewhere.

If you damage the car, the typical procedure is as follows:

The car hire company will charge you for the damage or the excess.
You will pay the amount, or the rental company will deduct it from your security deposit.
You will receive a report, an invoice and other documents from the car hire company.
You report the damage to your external insurer.
The insurer will assess your claim.
They will then reimburse you for the approved amount.

Insurance via Booking.com is also external insurance

When booking a car via Booking.com, you may be shown a Full Protection offer.

However, this is not cover provided by the car hire company.

In practical terms, it works on the same principle as separate external insurance:

the car hire company may charge you for any damage
the excess is not usually reduced
you pay for the damage first
you then claim a refund

Booking.com itself states, with regard to third-party insurance, that in the event of damage, the customer must first pay the car hire company and then submit a claim for reimbursement. It also points out that third-party insurance does not reduce the deposit required when collecting the car.

Booking.com is therefore not a third, separate type of insurance. It is simply one of the places where you can purchase external insurance.

Compare car hire companies via Booking.com

Where to get third-party insurance

When booking a car

The most convenient option is to purchase external cover directly when making your booking.

This may be offered, for example, by Booking.com or another booking partner that you can access via a comparison site.

On portals such as Kayak or Skyscanner, it depends on which partner you complete your booking with. These portals often compare offers and redirect you to the car hire company’s website or that of another booking partner.

With a specialist insurance provider

You can also purchase external insurance separately.

There are one-off products for a single specific hire, as well as annual insurance valid for multiple trips.

This is particularly worthwhile for people who hire cars several times a year.

It may also be advantageous for people who have a long-standing insurance provider for other things (home insurance, life insurance, etc.). You’re familiar with your insurer, you know who to turn to, and you may also be able to get various discounted rates for extending your cover to car hire.

💬 Do you have a favourite insurance provider? Please share your experiences in the comments below the article – thanks!

As part of travel insurance

Some travel insurance policies include, or allow you to add, excess cover for a hire car.

Make sure you check the excess limit.

If the car hire company requires an excess of 2 000 eur and your travel insurance only covers 826 eur, you’re still bearing a significant portion of the risk yourself.

As a credit card benefit

Some premium payment cards include cover for hire cars.

However, a condition may be, for example:

paying for the entire hire with that card
declining the rental company’s additional cover
a limited hire period
country-specific restrictions
exclusion of expensive or specialised vehicles

It is therefore not enough simply to know that a card ‘includes car insurance’. You must check whether it covers the excess on a hired vehicle and, if so, to what extent.

Does insurance booked through a booking portal differ from a personal insurance policy?

From the car hire company’s perspective, no.

The same principle applies to both options:

the car hire company does not provide the insurance
the rental company is not obliged to take it into account when you collect the vehicle
the security deposit is not usually reduced
you may have to pay for the damage out of your own pocket initially
reimbursement is dealt with afterwards

The main difference lies in how the cover is purchased.

External insurance at the time of booking	Separate external insurance
you buy it together with the car	You buy it separately
usually valid for a single hire	can be either a one-off or annual policy
easier to arrange	wider choice
the terms are determined by the product on offer	you can compare several insurers
may be more expensive	may be cheaper
the booking and the insurance policy are linked	You must check the terms and conditions yourself

Taking out insurance via a booking portal can be more convenient when making the booking itself.

On the other hand, it can be more challenging when dealing with a problem – for example, the booking portal’s external insurer will almost certainly not be based in your country. You will therefore need to communicate with the insurer in English.

If you choose your own insurer, this may be an advantage for you if you wish to communicate in your native language.

Advantages of external insurance

Lower price

External insurance is usually significantly cheaper than the excess waiver sold directly at the car hire counter.

The biggest difference arises with longer-term hire, as the rental company usually charges for the cover on a daily basis.

It can cover more parts of the car

The car hire company’s basic CDW often does not include, for example:

tyres
wheel rims
windscreen
roof
chassis

External insurance may cover these parts. However, this always depends on the specific terms and conditions.

Option for annual cover

If you’re hiring a car for multiple trips, you don’t need to buy new cover for every booking.

You can choose your own product

You’re not limited to the options offered by the car hire company or booking portal.

You can compare:

price
maximum cover limit
geographical coverage
maximum hire period
parts of the car covered
insurer’s rating
claims handling procedure

Disadvantages of external insurance

The rental company may require a full deposit

External insurance does not alter the hire agreement.

The rental company may therefore block, for example, 1,000 or 2 000 eur on your card, even though you have external insurance with a high cover limit.

You must pay for the damage yourself initially

You must have a sufficient credit limit on your card or a financial reserve.

The insurance company will only reimburse you once the claim has been reported and approved.

You must obtain the necessary documents

The external insurer may require, for example:

a tenancy agreement
handover report
damage report
the rental company’s final invoice
proof of payment
photographs
police report
correspondence with the hire company

The hire company may offer you its own insurance cover

At the counter, you’ll often hear statements such as: ‘Your external insurance isn’t valid with us.’

This statement is misleading, but partly true.

External insurance does not, in fact, alter your liability towards the car hire company. The car hire company may charge you for the damage.

However, insurance can ensure that the external insurer subsequently reimburses you for this amount.

When is third-party insurance worth it?

I would opt for it particularly if:

you’re hiring a car for a longer period (more than 10 days)
you want to save money on the car hire company’s expensive package
you have a sufficient credit limit on your card to cover the deposit
you are able to pay for any damage yourself initially
you’re willing to keep and provide the necessary documents
you don’t mind dealing with the insurance company yourself
you hire cars several times a year
you want cover for tyres, glass or the chassis

3. Without additional cover

The third option is not a different type of insurance, but the decision not to purchase any additional cover.

In most countries, the hire price usually includes basic cover, which limits your liability for damage to or theft of the car.

However, you are still liable for an excess.

If the excess is 1 200 eur and the rental company legitimately charges you for damage amounting to this sum, you will have to pay the full amount out of your own pocket.

Be aware, however, that the excess can sometimes be considerably higher. I have even come across amounts of around 3 000 eur.

Advantages

you pay nothing extra
if the hire goes smoothly, this is the cheapest option
You don’t have to worry about duplicate insurance

Disadvantages

You risk losing your entire excess
Basic cover may have many exclusions
The rental company may require a high deposit
A minor scratch could cost hundreds of euros

We would only choose this option if you know exactly what the maximum risk is and losing the entire excess would not be a major financial problem for you.

💬 Are you booking a car hire with no insurance at all? Let us know in the comments below the article.

How CDW, SCDW and other abbreviations work

Abbreviations often vary between different car hire companies. The most important ones are as follows.

Abbreviation	What it means
TPL	insurance covering damage caused to other people, vehicles or property
CDW or DW	Limitation of liability for damage to a hire car
TP	Limitation of liability in the event of car theft
SCDW	further reduction in the basic excess
Zero Excess	zero excess for damage covered under a specific package

Names may vary between different car hire companies. You should therefore always check the actual excess amount, the parts of the car covered and any exclusions.

What insurance often does not cover

Common exclusions include:

tyres and wheel rims
windscreen and other windows
mirrors
roof
chassis
interior
lost keys
wrong fuel
flat battery due to driver’s fault
towing following a breach of contract
extra cleaning

Coverage does not usually apply in the following circumstances either:

driving under the influence of alcohol
driving by an unauthorised person
driving off authorised roads
failure to report an accident
leaving the scene of an accident
crossing the state border without authorisation
intentional damage or gross negligence (for example, smoking inside the vehicle)

So don’t just look at the excess amount. The list of covered parts of the car and exclusions is just as important.

What to look out for when collecting the car

Regardless of the cover you’ve chosen, always document the car thoroughly.

Take photos of all sides of the car.
Film a video of the whole car.
Take photos of the wheels and tyres.
Check the windscreen (this is very important – I’ve noticed scratches on the windscreen several times just after setting off)
Take photos of the condition of the interior.
Note down the fuel gauge reading and the mileage.
Make sure any damage is recorded in the report.
Check the amount blocked on your card.

Repeat the same procedure when returning the car.

If you are returning the car outside of opening hours, take photos of its condition in the car park, the fuel gauge, the area around the car and the handover of the keys.

What to do in the event of damage or an accident

Always follow the terms and conditions of the car hire company and your insurance policy.

Usually, you need to:

ensure the safety of the occupants (in particular, put on a high-visibility vest and move everyone off the road)
contact the rental company or its breakdown service
call the police if required by the terms and conditions or local laws
take photographs of the damage and the scene of the accident
obtain the details of the other parties involved
Have an accident report drawn up (in some countries, for minor damage, you fill in the report yourself; in that case, it should be kept in the car)
keep a record of all correspondence
Request the final invoice from the car hire company
obtain proof of payment for the damage
submit your claim to your external insurer in good time

Do not have the car repaired without the car hire company’s prior consent.

Our experience of hiring a car abroad

Car hire companies’ terms and conditions, road quality and risks vary significantly depending on the destination.

In some countries, the biggest problem is a high security deposit; in others, it is the condition of the roads, tyre damage or driving on unpaved roads.

You can find our most recent first-hand experiences in the articles:

Which option should we choose?

I don’t want to have to deal with anything in the event of damage

Buy the highest level of cover directly from the car hire company.

You’ll pay more, but if damage is covered, you generally won’t have to pay a high excess upfront and then claim a refund.

I want to save money and have enough in reserve

Opt for external excess insurance.

You can buy this when booking the car or separately. Bear in mind, however, that the rental company may block a large deposit and you’ll have to pay for the damage out of your own pocket initially.

I hire a car several times a year

Look into annual external insurance.

It may be cheaper than buying new cover for every hire.

I don’t have a high credit limit on my credit card

Look for cover directly from the rental company that explicitly reduces the deposit.

Third-party insurance usually doesn’t solve this problem.

I’m willing to risk the full excess

You can stick to just the basic cover.

But check in advance the maximum amount the car hire company can claim from you in the event of damage.

Summary

There are two basic models for insuring a hire car.

Cover provided directly by the car hire company reduces your liability directly to the company hiring you the car. It’s the simplest option, but usually the most expensive.

External insurance will reimburse you for any damage or excess charged by the rental company. It doesn’t matter whether you buy it through Booking.com, separately, as part of travel insurance or as a credit card benefit.

💬 Which option do you choose when travelling? Share your experiences – thanks!