Hiring a car in Australia often comes with a standard excess of around $4,000 if the vehicle is damaged or stolen, yet many travellers only discover this cost when they’re handed a bill at the return desk. That’s a significant out-of-pocket expense that can turn a holiday budget upside down.
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This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Most rental companies include Compulsory Third Party (CTP) insurance and a standard liability waiver in the daily rate. But that waiver still leaves you on the hook for a large excess if something goes wrong. The question isn’t whether you need cover — it’s whether you should pay the rental desk $65 a day or find a cheaper option before you travel. Here’s what you actually need to know.
Four Things to Know About Rental Car Excess Insurance
The central concept here is the excess — the amount you pay out of pocket before the rental company’s insurance kicks in.
What I tend to notice is that most people focus on the daily rental price and ignore the excess until they’re standing at the counter. That’s when the upsell happens. A bit of planning beforehand can save a lot.
How the Excess Actually Works — and What It Costs You
The rental company’s standard liability cover (often called a Collision Damage Waiver or Loss Damage Waiver) reduces your responsibility for damage to the vehicle. But it doesn’t eliminate it entirely. You’re still liable for the excess — typically around $4,000 — if the car is damaged or stolen.
Rental car excess insurance is a separate product that covers that excess amount. It doesn’t replace the rental company’s insurance. Instead, it reimburses you for the excess you pay to the rental company after an incident. According to Flight Centre’s guide, daily rates at the rental desk range from $20 to $65. Over a two-week trip, that’s $280 to $910.
Standalone policies from specialist insurers typically reduce your exposure to between $0 and $500. Some annual policies cover unlimited rentals for a flat fee. The trade-off is that you pay the excess to the rental company first, then claim it back from your insurer. That means you need the cash flow to cover $4,000 upfront while the claim processes.
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| Coverage type | Typical cost | Excess you pay | Best for |
|---|---|---|---|
| Rental desk excess reduction | $20–$65 per day | $0 | Short trips, no existing cover |
| Standalone annual policy | $50–$150 per year | $0–$500 (reimbursed) | Frequent renters |
| Travel insurance add-on | Often included or $10–$30 per trip | $0–$500 (reimbursed) | Occasional travellers |
| Credit card insurance | Free (if terms met) | $0–$4,000 (varies) | Cardholders who pay for rental with that card |
If you rent a car twice a year, a standalone policy almost always beats the daily desk rate. The difference is even starker for longer trips.
Common Gaps and Mistakes People Make
Assuming the rental company’s insurance covers everything
Standard liability cover excludes specific items. Windscreens, tyres, headlights, and the undercarriage are often not covered. If you crack a windscreen on a country road, you could be paying for the replacement yourself — even if you bought the rental company’s excess reduction. 1 Cover Travel Insurance notes that some standalone policies do cover these items, but only if they’re not specifically excluded in the product disclosure statement. Always read the exclusions before you travel.
Relying on credit card insurance without checking the terms
Many premium credit cards offer rental car insurance, but the conditions are strict. You usually need to decline the rental company’s collision damage waiver and pay for the entire rental with that card. Some cards only cover vehicles rented in your country of residence, and many exclude vans, utes, and luxury cars. A quick call to your card issuer can save a nasty surprise.
Buying the rental desk policy out of convenience
It’s easy to say yes when the agent asks. But at $65 a day, a two-week rental costs $910 in excess insurance alone. That’s more than many standalone annual policies. What I’d do is check my existing cover before the trip, then buy a standalone policy if needed. The rental desk should be a last resort, not the default.
Forgetting to check travel insurance inclusions
Some travel insurance policies include rental car excess cover as a standard benefit, but often at a lower sub-limit. You might be covered for $2,000 of a $4,000 excess, leaving you to pay the rest. If you already have travel insurance, read the rental vehicle section carefully. If the sub-limit is too low, a top-up standalone policy fills the gap.
How to Get the Right Cover — Step by Step
Check your existing policies first
Start with your comprehensive car insurance. Some Australian policies extend cover to rental cars, but the terms vary. If your policy covers hire vehicles, you may not need anything else. Next, check your credit card benefits. If you pay for the rental with that card and decline the rental company’s waiver, you might have cover for the excess. Finally, review your travel insurance. Many policies include rental car excess cover, but the sub-limit may be lower than the rental company’s excess.
Compare standalone rental car excess insurance
If your existing cover is insufficient, buy a standalone policy from a specialist insurer, broker, or comparison site. Annual policies cost between $50 and $150 and cover unlimited rentals within Australia. Per-trip policies cost less upfront but only cover that single hire. The key difference is that standalone policies reimburse you after you pay the excess to the rental company. You need to be comfortable with that upfront cash flow.
Decide at the rental desk — but only if you have to
If you arrive without any cover and the rental company offers excess reduction, you have a choice. For a short rental of one or two days, the daily rate might be acceptable. For anything longer, it’s expensive. If you’re in this position, consider buying a standalone policy on your phone before you sign the rental agreement. Many insurers offer instant cover online.
Watch for upcoming changes in rental insurance rules
Insurance regulations and credit card benefits change regularly. Some Australian credit card issuers have reduced or removed rental car insurance benefits in recent years. Before each trip, verify that the cover you relied on last time still exists. The same applies to travel insurance policies — check the product disclosure statement for the current terms, not the one from your last holiday.
Frequently Asked Questions
Does my comprehensive car insurance cover rental cars in Australia? ▾
Can I buy rental car excess insurance after I’ve picked up the car? ▾
Does rental car excess insurance cover damage to windscreens and tyres? ▾
What happens if I have an accident and the excess is $4,000? ▾
Is rental car excess insurance the same as collision damage waiver? ▾
Does travel insurance cover rental car excess in Australia? ▾
The Real Cost of Saying No to Cover
A $4,000 excess is not a hypothetical figure. That’s the amount you’d pay out of pocket for a minor collision or theft. Against that, a $50 annual standalone policy looks like a trivial expense. The mistake is treating rental car excess insurance as an optional add-on rather than a core part of your travel budget. Check your existing cover, compare a standalone policy, and only use the rental desk as a last resort. A few minutes of planning before your trip can save you hundreds of dollars — or thousands if something goes wrong.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read Beyond Price: Choosing the Best Car Insurance in Australia.
Sources and Further Reading
Shocking Car Insurance Facts Every Aussie Driver Needs to Know — Eye-opening data on how many drivers are underinsured and what it costs them.
Canstar (2025). Rental Car Insurance in Australia. 🔗
Flight Centre (2025). Complete Guide to Rental Car Insurance. 🔗
1 Cover Travel Insurance (2025). Car Rental Excess Insurance. 🔗
