Rental car insurance: car hire excess cover explained
Rental car insurance in Australia usually means covering the excess: the amount you owe the hire company if its car is damaged or stolen, which can run to several thousand dollars. You can reduce it at the counter for a daily fee, rely on the rental vehicle excess cover in a travel insurance policy, or use cover that comes with a credit card, and each option has its own exclusions.
None of the three makes you fully covered. Roof and underbody damage, unsealed roads, breaches of the rental agreement and the hire company's admin and loss-of-use fees are common gaps, so read the rental agreement as closely as the policy. Our guide to compare travel insurance covers the rest of a travel policy.
By Better Rate Mate Editorial Team ยท Last reviewed
How rental car excess works
A hire car comes with damage cover built into the rental, but it is limited by an excess. Avis Australia, for example, published a standard excess of $5,900 for most of its cars, which its Excess Reduction option lowered to $1,500 and its Zero Excess option to $0, as at 2 October 2026. The excess depends on the vehicle, and four-wheel drives and luxury cars carry more.
The ACCC says hire contracts usually state that you won't be covered for certain types of damage, or must pay extra to be covered, and that they may include agreeing to unlimited charges on your credit card. It suggests asking before you hire whether there are gaps in the cover, such as single-car accidents, and when and how much the company can charge to your card.
Three ways to cover the excess
Each option reimburses or reduces the same excess, but in different ways and with different gaps.
| Option | How it works | Common exclusions and limits | Where it applies |
|---|---|---|---|
| Hire company excess reduction | You pay a daily fee at the counter to lower the excess you would owe | Avis's Loss Damage Waiver, Excess Reduction and Zero Excess don't cover overhead, underbody or water damage | That hire only |
| Travel insurance rental vehicle excess | You pay the hire company, then claim the excess back from your insurer, up to a limit | Cover-More: $5,000 on Comprehensive and $10,000 on Comprehensive+, none on Basic; excludes breaches of the rental agreement, unsealed surfaces and admin or loss-of-use fees. Allianz: $6,000, none on Basic; tyres, glass, roof and underbody may not be covered if charged on top of the stated excess | Overseas, and in Australia on domestic plans |
| Credit card complimentary cover | Cover attached to the card, usually activated by paying for the hire or trip on the card | Smartraveller warned in October 2026 that several banks are reducing or removing card travel insurance, including rental vehicle excess cover | As the card's current policy sets out |
What the cover usually leaves out
Whichever option you choose, these are the gaps that most often leave hirers paying.
- Roof, overhead and underbody damage: excluded from Avis's waivers, and possibly not covered by Allianz when charged on top of the excess.
- Unsealed roads: excluded by Cover-More's rental vehicle excess cover.
- Breaches of the rental agreement, such as an unauthorised driver or driving without a licence for that vehicle: excluded by Cover-More and Allianz.
- Admin fees and loss of use: Europcar's damage policy lists both among the charges it can apply, and Cover-More, Allianz and nib exclude them.
- Vehicle types and weights: nib covers four-wheeled vehicles under 4.5 tonnes, and Allianz covers campervans and motorhomes up to 4.5 tonnes and Cover-More up to 6 tonnes.
What happens if you damage a rental car
Report it to the hire company straight away and record what happened: the other people involved, witnesses, and photos of the vehicles and the scene. At return, the company inspects the car and notes new damage. Europcar's damage management policy, for example, says it will notify you of a claim, then tell you the amount it intends to charge, typically 3 to 60 days later, up to the cost of its Damage Liability Fee if you haven't breached the rental contract, with the repair quote, loss-of-use calculation and admin fee as evidence. It also sets out how to dispute a charge.
The ACCC's advice is to photograph the car at pick-up and return and, if damage is found, to get a written agreement on the costs and repair process before you leave the premises. Europcar asks you to dispute a charge within 7 days of its first notice. The ACCC doesn't resolve individual car hire disputes, so keep your own records. Then claim the excess from your travel insurer or card provider with the rental agreement, the damage report and the receipts.
Hiring a car overseas
Overseas, the licence rules matter as much as the insurance. Smartraveller warns that driving without an International Driving Permit where one is required can void your travel and vehicle insurance in places such as the USA and Croatia, and a hire company may insist on one even where the law doesn't. Check the rules on each destination page, such as Europe, Japan and the USA.
In North America, rental cover can be bigger than an excess. Cover-More's Comprehensive+ plan includes a collision damage waiver of up to $200,000 in the USA and Canada, covering windscreens, tyres, roof and undercarriage, for a vehicle worth no more than $200,000 and under 10 years old.
Hiring a car in Australia
In Australia, rental vehicle excess cover comes with domestic travel policies, often as the main reason people buy one: Cover-More's domestic plans carry the same limits as its international ones, Allianz's Domestic plan $6,000, and Fast Cover's Domestic Plus $5,000. nib's cover applies within Australia only on annual multi-trip journeys at least 200 km from home. See domestic travel insurance for the rest of what a domestic policy covers.
Is extra rental car cover worth it?
Compare the cost of each option for the length of your hire. Smartraveller notes that rental vehicle excess cover could be cheaper through your travel insurer than through the car hire company, and an annual travel policy can cover several hires a year. The counter option can still suit a short hire, or a renter who wants to avoid paying the excess upfront and claiming it back. Whichever you choose, check it covers the vehicle, roads and drivers you will actually use.
What to watch for
- The excess is set by the vehicle and can be several thousand dollars. Read it on the rental agreement before you sign.
- Roof, underbody and water damage are often outside the hire company's waivers.
- Travel insurance repays the excess after you pay it; you still need the money upfront.
- Don't assume your credit card still includes rental cover. Check its current PDS.
- Photograph the car at pick-up and return, and get any damage agreed in writing before you leave.
Common questions
What insurance do I really need when renting a car?
The hire includes basic damage cover limited by an excess, so what you need is a way to cover that excess: the hire company's excess reduction, rental vehicle excess cover in a travel policy, or card cover. Check the exclusions, especially roof and underbody damage, unsealed roads and unauthorised drivers.
Does my comprehensive car insurance cover rental cars?
Don't assume it does. A car insurance policy covers the vehicles and drivers its PDS describes, so check yours before you hire, and read what the hire company's agreement requires. Travel insurance rental excess cover is designed for hire cars.
Does my credit card cover rental car insurance in Australia?
It may not any more. Smartraveller warned in October 2026 that several Australian banks are reducing or removing the travel insurance on their credit cards, including rental vehicle excess cover. Read your card's current PDS, including how cover is activated.
What happens if I damage a rental car?
Report it to the hire company, record what happened, and get any damage agreed in writing at return. The company charges up to the excess if you haven't breached the agreement, and may add fees such as loss of use and admin. You can then claim the excess from your travel insurer, but those fees are usually excluded.
Is it worth getting additional insurance on a rental car?
It is worth having some way to cover the excess, because it can run to several thousand dollars. Compare the counter price for your hire length with travel insurance rental cover, which Smartraveller notes could be cheaper, and check what each excludes.
