The ins and outs of Car Hire Insurance
I’ve worked in the car hire industry for a long time. And, unsurprisingly, at least half the questions I get asked are about car hire insurance.
The first thing to say is that all cars rented in the EU must have basic car hire insurance in place. This ensures all rentals have third party liability included in the contract. It also ensures they can be legally taken onto public roads. So when you book a car hire, the rental rate you see will already include basic car hire insurance.
It’s worth bearing in mind that the contract you sign when you collect your car is also an insurance policy contract. So make sure to keep your copy of the contract in the car in case you are stopped by the police. You can prove that you have the owner’s permission to drive and that the car is covered by the legally required insurance. Not wishing to scare you, but it’s not unknown for the police to impound the car and leave the family stranded or charged with an offence just because the contract is not to hand.
Right, let’s get on to the nitty-gritty stuff you really want to know about… For instance, what are CDW and TP? What is the Excess Liability? What are the extra insurance covers the suppliers want to sell me? And do I really need them? Also, how does private insurance work?
Collision Damage Waiver (CDW) and Theft Protection (TP)
CDW stands for Collision Damage Waiver. This is the basic third party insurance included in the hire cost. TP stands for Theft Protection. Also included in the hire cost for the supplier’s peace of mind. Beware, if the car is stolen, you must be able to return the key if you want this insurance to be valid. If you left the key in the car, it will be considered negligent and you will be liable.
So every car in Spain has this basic level of car hire insurance. The problem is that it is very basic and will only pay for damage to the other car, property or persons. As for the hire car itself, YOU are liable for the costs of any damage up to the the “Excess Liability” limit.
Excess Liability and a deposit on your credit card
The vast majority of car hires have an Excess Liability. And the amount can vary depending on the supplier as well as the type of car. You can find out how much the Excess Liability is under the Terms and Conditions when booking a car. If you can’t see it, check with your booking agent. It’s worth noting, because you’ll be required to leave a large deposit held on your credit card for the Excess Liability when you collect the car. Usually, the deposit required is the same as the Excess Liability, but check this before you book. And remember that the deposit MUST be held on your credit card. If you don’t have a credit card, or have one but it doesn’t allow the full amount of the deposit to be held, you may not be able to hire the car at all.
What does Excess Liability mean in real terms?
It’s hard to be too specific as each supplier has their own way of working. Generally speaking, there are levels of liability, each of which can be covered by purchasing extra levels of insurance from the supplier.
Firstly, your liability includes the wheels, tyres, glass, underbody, roof, interior, etc of the car. The supplier wants you to “take care of the car as if it was your own and you had just bought it”. It means that if there is tyre damage of any kind, you have to pay for a matching set of two replacement tyres. Wheels means hub caps, rims, brakes etc. Glass means windshield, windows and mirrors. Cracks, chips of any kind, you pay. Scratches and dents, you pay – including on the roof or bonnet.
A couple of tips:
- Don’t try to use a hire car to transport heavy objects either on the roof or inside where the internal upholstery could be damaged.
- Don’t try to drive over the kerb or take the car off-road. This can cause underbody damage, which you would be liable for.
Reducing your liability
You can usually purchase the first level of extra cover for these items, but beware of the “let-out” clauses. Make sure you know what is not included in this cover. For instance, anything that the supplier considers “negligence” is not covered, such as driving off-road, or damage caused by jumping the central reservation because you set off on the wrong side of the road in the morning. You’d be surprised how common that one is!!
However, this first level extra insurance does not help in case of an accident, the first part of the cost must be paid by the hirer, up to the Excess Liability amount. The CDW insurance will cover the rest.
Reducing it to zero!
The next level offered is what most suppliers call SuperCover, Super Relax Cover or something similar. It’s now unknown for suppliers to use fairly hard-sell tactics to get customers to buy this cover. On booking forms and at the desk, this is often referred to as the “Buy-out”. Depending on the supplier and the type of car, this will reduce your liability to zero. Or at least, lower the amount of liability in the case of high range cars.
The cost of these Super CDW insurances can be quite high. Between 100 to 200 euros (or more), depending on the supplier and the type of car. Be aware that most suppliers do not actually sell you an insurance at this point. Most are simply taking your money into their bank account and promising to look after you. While this works fine most of the time, in cases where disputes arise, there is no insurance protection body or ombudsman to go to. This is one of the reasons why a lot of people choose to take out a private cover using a reputable insurer.
Many suppliers also offer a further level of protection, which covers personal injury to driver and passengers and luggage. If offered, this will be a real insurance, similar to a travel insurance. If you already have travel insurance (always a good idea), then you probably don’t need to buy this from the hire car supplier.