Rental car insurance

You’re eager to get on the road but first you’re confronted with a long list of costs. Some of these are optional and some not-so-optional (such as the excess waiver). What might have looked like a great daily rental car rate in the advertising now doesn’t look quite so great. Do you have to pay all these costs or are there alternatives?

Rent a car in New Zealand and the rental company’s standard insurance cover is included in the quoted price. It usually covers theft or damage to the vehicle; consequential damages; losses or costs to the rental company such as salvage costs, loss of revenue or loss of ability to rehire; and liability for damage to (or loss of) third-party property.

You get all this as long as you don’t break any of the terms and conditions of the rental agreement – including its exclusions.

Excesses and waivers

Standard rental-car insurance comes with an excess. Have an accident or otherwise damage the car and you’re liable for up to that amount of excess … and that’s for each claim. Ding the car twice and you’ll pay that excess twice! For a medium-sized late-model car from a top-tier rental company the excess is $3450. Cheaper rental companies charge about $1500 to $2000.

Not at fault? You’ll still have to pay the excess. That’s because vehicle insurance isn’t compulsory here – and so there’s no guarantee the rental company will be able to recover the cost of damage from the other driver. If it does recover the cost, you may get the excess back. Otherwise you’ll lose all or part of it (how much you’ll lose depends on the cost of any repairs). What’s more, you could also have to pay an administration fee for processing the damage claim.

The excess waiver

The excess can seem alarmingly large. So the companies have cunningly created what’s sometimes branded as “Peace of Mind” or “Stress-Free” cover, aka the excess waiver (also called an “excess reduction” or “collision-damage waiver”).

For a fee of around $28 to $30 per day the excess at the big companies will drop to a few hundred dollars for a 7-day hire. At the smaller companies it’ll cost around $12 to $15 a day to do this. Some smaller rental companies charge a higher excess waiver for shorter hires.

Pay a little bit more at some companies and you might be able to reduce that excess to nil (see the table below).

But the per-day cost of an excess waiver can add up, especially on a lengthy holiday. That certainly takes the gloss off what seemed like a good deal.

What’s more, the excess waiver won’t necessarily cover all accidents. With Jucy, if you roll the vehicle or damage the roof without another vehicle being involved, you’ll be paying the full excess. Single-vehicle accidents may have a different excess at some companies. Pegasus has a non-reducible excess of $1500 for single vehicle accidents.

Also watch out for fine-print traps. If you don’t take the highest level of excess waiver with Jucy, any theft or attempted theft of the vehicle resulting in damage might not be covered. And with Hertz, Jucy, GO Rentals and Apex, if you damage the rental and you’re given a replacement vehicle, the original excess waiver isn’t transferable – which means you need to pay for another excess waiver. With Omega if you’re charged with an infringement or offence as the result of an accident, your liability is increased to the replacement cost of the vehicle, or a minimum of $5000.

Car-rental companies' excesses and waivers

Waiver alternative

There’s no alternative to rental-car insurance: it’s standard for New Zealand rentals. Corporate customers may be able to use their company insurance. Personal customers who want to opt out would have to negotiate an acceptable arrangement with the rental company.

However, there’s an alternative to the excess waiver.

You can take out domestic travel insurance. Some of these policies will cover the car-rental excess and their excess – if there is one – may be smaller than the car-rental excess waiver. The cost of cover ranges from $26 to $90 a week (see the table below).

But there’s one obvious hitch: if the rental vehicle is damaged, you’ll still have to pay the excess upfront to the rental car company and then claim it back from your travel insurer. Do you have a spare $3500 to cover that and the time to run around filing a claim?

And if you violate your rental-car agreement you can’t make a claim on your travel insurance for any costs.

Bad news for gold and platinum credit-card holders: we couldn’t find domestic travel covered by any of the free credit-card travel policies offered here by MasterCard or Visa.

Domestic travel insurance cover and costs

Exclusions

Check the terms and conditions of your rental-car agreement and you’ll see a long list of exclusions. It’s enough to make you put the rental in bubble wrap.

Many agreements don’t cover:

• damage to the windscreen, roof or underbody of the vehicle
• punctures or tyre damage
• “off-road” driving (this includes driving on unformed roads or even driveways that might cause damage)
• damage caused by items carried inside or outside the vehicle (such as surfboards or bicycles).

So if you’re thinking of driving on to the sand beside the lake and standing on the roof to take a photo of the sunset … don’t.

Also stay off Skippers Canyon Road and Ninety Mile Beach. These feature in most Kiwi vehicle-rental companies’ exclusions – along with some other notorious roads.

Bonds

Bonds are a security payment to cover the insurance liability and any incidentals.

The bond, if there is one, is taken upfront from your credit card. The company may debit this immediately and refund it to you later. Or it may just pre-authorise the amount and have a hold on the funds. Jucy and GO Rentals treat the standard excess amount as a bond if you don’t take an excess waiver and they pre-authorise it on your credit card.

Pay for a car rental in cash or by debit card and you’re likely to be asked to also pay a bond.

A bond can be a substantial amount of money. It could be up to the same amount as the excess. So you’ll need to make sure you can cover it – and still have some holiday money.

Before you book, check if a bond is applied and how. If it’s put through as a debit, or you pay it by cash, ask how long the company will take to refund it.