Rental car insurance may not cover the whole vehicle. Here’s what you need to know about car rental insurance policies.

Renting a car can be a pretty good alternative that sits between relying on public transport and bearing the financial burden of owning a car. You’ll get full use of the vehicle when you need it, without having to worry about maintenance, upkeep, or even having to wash your car. 

You do not need to have auto insurance before renting a vehicle. Instead, your rental agency will ask you to sign up for an auto insurance package that comes into force for the duration of your rental period. 

Here’s what you need to take note of when signing up. 

1. Watch out for excess

Yes, while driving a rental car you should probably watch out for excessive behaviours like pounding cans of RedBull and getting into a staring contest with your buddies while blasting your favourite EDM tracks. But what we actually mean is the excess on your car rental insurance. 

Car insurance policies commonly have an excess, which is a sum that you will need to cover before any claims are applied. 

To illustrate: Say your rental insurance policy has an excess of $1,000. So, if you get side-swiped and lose a side mirror which costs $150 to replace, there’s no point in making the insurance claim. 

This is because you will need to pay out of pocket up to $1,000 in repairs cost (aka, the excess), before your insurance will foot the rest of the bill. In this case, you’re only paying $150, which is well within the excess amount.

However, if you get rear-ended, for instance, and the repair bill will cost you $3,000, please do claim your insurance. That way, you will pay only $1,000, while your insurer covers the remaining $2,000.

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2. Watch out for ‘double’ or ‘multiple’ excess

No, we don’t mean doubling down on that Red Bull and deciding it’s a good time to test the maximum speed of the car you’ve rented, but rather how many times your excess could be applied. 

You see, auto insurance can be roughly split into two parts: coverage for you, the driver, and coverage for third-parties, like your buddies having an impromptu wrestling match in the backseat.

Some auto insurance policies apply an excess on both portions (aka “excess separately”). How does this work? Say you get into a rather serious accident that results in a damaged car door, and a fractured wrist for your friend who was riding with you. 

As the driver of the rental car, you are now responsible for making good on two sources of damages: 

1. Repairs to the car  

2. Hospitalisation and medical bills for your friend

Now, if your insurance policy goes by a ‘double excess’ format, you’ll need to pay the excess twice – once when you foot the car repair bill and once when you pay your friend’s medical bills (assuming he brings a claim against you).

Depending on the amount of excess in your policy, this could end up being very costly for you.

There are two ways you can manage this: 

1. Opting for a lower excess amount, which will result in a higher rental charge

2. Choosing a policy with a single excess that applies on the sum total of any and all damages against you. 

3. Be sure to name all co-drivers

If your buddy or relative will also be driving the rental car at some point, be sure to register them when getting your auto insurance. 

While this will drive up your insurance premiums – especially if your co-driver(s) are young males with less than two years’ experience behind the wheel – it’s far better to suck it up and pay. 

That’s because should an accident occur while an uninsured driver is behind the wheel, your auto insurance is automatically voided, leaving you with no coverage whatsoever. Depending on the severity of the incident, this could be financially catastrophic, even ruinous.

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4. Cross-border travel may not be allowed

If you’re planning to drive across the border into another state or country, you should inform your insurer when applying for rental insurance. 

This is because by default, auto insurance only applies when you’re driving within a local territory, and can become voided the moment you cross borders.

Plan your route carefully, and inform your insurer so they can arrange for the proper insurance coverage for you and the vehicle.

5. You may not qualify for rental car insurance, even if you are a qualified driver

Some car rental companies have strict criteria regarding who can rent their cars. Some of these include age limits (younger drivers may be disqualified), number of years of driving experience, as well as the type of license. 

In fact, it is common for rental car companies to reject P-plate drivers. 

If you’re planning to drive while holidaying in a foreign country, it helps to have an International Driving Permit (IDP).

This diving license contains driving terms in various languages, helping ease the rental application process in non-English speaking countries.  

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6. Don’t neglect theft/loss damage waiver

Traffic accidents aren’t the only thing you need to worry about when driving a rental car. Your vehicle may end up stolen or lost!

As the registered driver of the vehicle, you are ultimately responsible for it while it is under your possession. 

This means that if that snazzy BMW you rented for your cousin’s wedding somehow got stolen while the wedding entourage was busy bargaining for entry to the bride’s home, you’re liable for the financial loss.

To avoid this nasty situation, check that your rental insurance includes a waiver for loss or theft of vehicle. You’ll need this waiver to be spared the financial liability of losing the vehicle. 

7. Don’t forget about the windshield and tyres

It sounds weird, but your rental car insurance may not cover the entire vehicle. Specifically, the windshield and tires may not be included in your policy. 

This means that if your car tyres get slashed or the windshield gets smashed in an attempted burglary, you may be liable for the full damages if your policy doesn’t cover these two items. 

This is presumably because tyre punctures or cracked windshields are quite common occurrences, so many insurers leave them out in order as a means to lower their overall premiums. 

But if you’re not willing to take the risk of paying for damage to both these components, be sure that your policy’s cover includes them. 

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This article was first published in SingSaver.com.sg.