Insurance when renting a car: What to know

Flipping through the Ts and Cs when you hire a rental car can feel a little overwhelming. How does the insurance work? What does excess mean? Are you fully covered if anything goes wrong? Not to worry. We’re here to answer all your questions about insurance when renting a car so that you can get on the road — with peace of mind — in no time.

Let’s get started.

Do you need to insure yourself on a rental car?

First things first, how does insurance on a rental car work? Do you have to take it out yourself, or is it the responsibility of your rental company? The answer: it’s almost always the latter. 

Even if you have car insurance in place for your own vehicle, it’s unlikely that your policy will automatically cover you to drive other cars, including rental vehicles. In fact, if you read your policy closely, you’ll probably find that it specifically excludes rental vehicles. 

It’s for this reason that almost all rental companies have basic insurance included in the cost you pay to hire the car. This means that you’re covered if the car is stolen, damaged, or responsible for any third-party liability while you’re driving it. 

The extent of this coverage can vary depending on the country you’re travelling in, though, so it’s always worth reading the fine print or chatting to a company representative directly. In the UK, car rental companies typically have third-party insurance, collision damage waiver (CDW), and loss damage waiver (LDW) in place. 

However, if the company has to make claims against these waivers, you’ll almost always have to pay a fee. This is called the excess (more on this in a minute). 

It’s worth exploring these types of coverage in a bit more detail.

Third-party insurance

Third-party insurance protects you in the event that a third party’s vehicle or property is damaged in an accident that is your fault. It also covers any injuries that they might sustain. In the car rental industry, third-party insurance is also known as supplemental liability insurance, though this often involves higher coverage limits.

The cost of third-party insurance is nearly always covered by the rental company in the UK and many European countries. But this isn’t always the case in the United States or Canada. Again, it’s worth chatting to your rental company so that you know exactly what’s included in your agreement. 

Collision damage waiver and loss damage waiver

CDW and LDW work similarly to standard car insurance. They help to protect you in the event that the vehicle you’ve hired is damaged or stolen.

While CDW covers you if you have an accident, LDW is a combination of CDW and theft protection. It means that you’ll be covered for the replacement of your car if it’s stolen while you’re renting it. In most countries, they come together, but in the United States in Canada, they can often be bought separately.

Bear in mind that CDW policies typically have exclusions in place. You probably won’t be covered for damage to the windscreen and windows, the tyres, the undercarriage of the car, the roof, the interior, and the side mirrors. If any of these areas are damaged, you’ll usually have to pay for the costs of these repairs yourself.

Basic CDW and LDS is typically included in most rental agreements, though it varies depending on the rental company and the type of vehicle you hire. It’s ultimately designed to reduce the amount that you’ll have to pay if anything goes wrong, but you’ll still likely have to pay a fee, the excess. 

You can take out additional CDW or LDW coverage to lower the cost of the excess or to do away with it entirely. This is usually called super collision damage waiver or super loss damage waiver. 

Additional options

You may choose to take out a variety of additional coverage options to protect you further. While these aren’t compulsory, they can give you the peace of mind that you’re properly covered. Depending on where you’re travelling, with whom, and for how long, some of these options might be more important to you than others.

Personal accident insurance: Covers the medical expenses of both you and your passengers in the event of an accident.

Personal effects coverage: Protects the personal belongings you store in your rental vehicle in case of theft or damage.

Roadside assistance: Supports you in case you break down, have a flat tyre, or experience any other non-accident-related issues, like replacing the car key.

Additional driver coverage: Allows additional drivers to be listed on the rental agreement and be covered by the insurance policy.

Young driver surcharge waiver: Waives the additional fee typically charged for drivers under a certain age (often 25) to rent a car.

Excess protection insurance: Offers coverage to reduce or eliminate the excess amount you’re liable for in the event of loss or damage.

What is the excess?

The excess is the amount that you have to pay to contribute to repair or replace the vehicle if it is damaged or stolen. It usually applies even if you aren’t at fault, and can be as high as £2,000, or even higher, depending on the value of the vehicle. 

You can lower this cost by taking out additional CDW or LDW coverage, or excess protection insurance. These add-ons often include coverage for issues such as cracked windscreens and punctured tyres. You can buy excess protection insurance either as a one-off for the duration of the car hire, or as an annual policy. The latter might be a good option if you rent cars regularly throughout the year.

Remember that any additional coverage you take out is optional, and will come at an extra cost. But it might help to mitigate the hit of a much higher fee if you have an accident. 

Should you take out extra insurance when renting a car?

While it’s not a legal requirement to take out extra insurance, it can often be a good idea. The standard insurance that your rental vehicle is likely to come with is typically fairly basic, and the excess charges can be high. 

Opting for additional CDW, LDW, excess protection insurance, or any of the other options listed above can help lower these excess fees, saving you from unexpected costs. Personal accident insurance is also important in case you or anyone you’re travelling with is injured. (Having good travel insurance in place is also a good idea.) 

Whether you take out extra insurance when renting a car is ultimately a personal decision. It will depend on your appetite for risk, and whether you’re prepared to cover the excess if you choose not to take out additional cover. Before you decide, make sure you know exactly what your agreement offers so that there aren’t any nasty surprises, and prioritise your safety and financial security. 

How much is insurance for a rental car?

There’s no one-size-fits-all answer to the question of rental car insurance costs. Every rental company is different. They all charge different amounts depending on the following criteria:

Type of coverage: Of course, the level of coverage you choose will affect the cost. While more comprehensive coverage can affect your insurance costs, they may pay off in the event of an accident.

Rental duration: The longer your rental period, the higher your insurance costs are likely to be. 

Type of vehicle: Premium or high-value vehicles are usually more expensive to insure than standard or economy vehicles.

Age of driver: Some rental companies charge higher insurance premiums for drivers under a certain age, typically under 25 years old, due to higher perceived risk.

Location: Insurance costs can vary depending on where you hire your rental vehicle. Rates tend to be higher in urban areas, airports, or areas with higher rates of accidents or theft.

Before you decide on a car rental company, shop around. The first company you come across might not be the one with the best deal.

Quickfire summary: Do you need insurance to rent a car in the UK?

The short answer here is no, you don’t need to have your own insurance in place to rent a car in the UK. Your rental company will have their own insurance in place, which will help to protect you. 

It’s a good idea, however, to consider whether you would like to take out additional insurance to guard you against steep excess costs in the event of an accident or theft. Read the fine print, speak to a representative from the company, and weigh up your options. Make sure you understand all of the limitations or exclusions that may apply. Sometimes, taking out a little additional coverage can help you save down the line.

If you have any car insurance-related questions, including questions about insurance for rental cars, speak to the experienced brokers at Howden. We’re here to help.

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