Planning a driving holiday? Don’t overlook your car rental insurance, which has a different focus than your regular travel insurance plan. Here’s how these two different-but-complementary policies work together.
If you’re planning a driving holiday down the Gold Coast, you may be wondering if your travel insurance policy also covers you when renting a car overseas.
Generally speaking, no. A standard travel insurance plan does not cover overseas car rental. Instead, you’ll have to get a separate motor insurance plan to cover the use of your rental car.
Let’s take a look at the difference between travel insurance and car rental insurance to better understand why.
Table of contents
- Difference between travel insurance vs car rental insurance
- What and why is rental car excess cover necessary?
- How to get rental car excess cover?
- [Bonus] Things to note about driving in West Malaysia
Travel insurance vs car rental insurance – what’s the difference?
Car rental insurance
Protects against common risks of overseas travel
Covers against liability arising from driving a vehicle
Mainly includes benefits for overseas medical expenses, personal accident, loss or damage to personal belongings
Benefits focused on protecting the driver against financial consequences of accidents, damage or loss of vehicle, or damage or loss to third parties. Thus, may also include personal accident or medical expenses cover.
May include limited cover for rental car usage, including rental car excess
May come with high insurance excess; reducing or waiving the excess requires added cost
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Travel insurance and car rental insurance do have some overlap in the benefits they offer, but both of these are designed with different areas of focus.
Travel insurance is aimed at offering broad-based cover against the common risks of overseas travel. This, of course, includes vehicular travel and public transport, which is why travel insurance plans commonly provide overseas medical coverage, as well as personal accident benefits.
On the other hand, rental car insurance is focused on the liability that drivers take on whenever they get behind the wheel.
As the driver, you will be liable for damages or claims should your car cause injury or loss to others, or damage to public or private property.
Furthermore, should the car you rent be stolen, lost or damaged, you will also be responsible for the cost of repairs and/or replacement of the vehicle.
Thus, rental car insurance is critical for anyone planning to rent a vehicle overseas.
And because travel insurance and rental car insurance ultimately have different goals, it is crucial to think of both of them separately – even if there is some overlap between the two.
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What is rental car excess cover, and why do you need it
There’s one thing to highlight about rental car insurance. While having rental car insurance will shield you from the financial impact of a road accident, you may not be fully spared the backlash.
This is because rental car insurance plans commonly come with excess, which is the amount you have to pay before your policy pays the rest. Insurance excess is nothing new – most motor insurance policies impose a S$100 excess charge for windscreen repairs, for instance.
However, in the case of car rental, the excess may be set at a high amount – up to several thousands, or more. If your policy comes with a high excess, you will potentially have to pay a large amount out of your own pocket, which negates the whole point of having insurance in the first place!
This is where rental car excess cover comes in. This is an insurance benefit that reduces the amount of excess you have to pay, or waives it off completely.
With rental car excess cover, you can be compensated for the full sum of repairs or damage, or claims from injuries or loss.
Clearly, this is a crucial benefit to have when renting a car, which makes it a shame that it is not included in most rental car contracts.
Instead, you’ll have to obtain your own rental car excess cover, which you can do in the following ways.
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How do I get rental car excess cover?
From your car rental provider
When you’re renting a car, your rental provider will likely attempt to upsell you on rental car excess cover.
You will be offered several different add-ons that are charged separately, and you get a sneaking suspicion that you have to purchase every last one of them in order to be fully covered against any excess or additional charges.
You’d be right, for several reasons.
One, because motor insurance policies don’t actually cover the entire vehicle, leaving out some commonly damaged components like tyres and windows and sunroofs. So if you neglect to purchase the appropriate add-on, you will be liable for charges related to a damaged window or undercarriage.
Two, it also doesn't help that car rental companies attempt to nickel-and-dime you by splitting up important coverage into different add-ons.
For instance, there’s what is commonly known as a Collision Damage Waiver (CDW) that reduces your excess should your rental car get damaged in an accident.
What if your vehicle gets stolen instead?
Well, in that case you’ll need Loss Damage Waiver (LDW), which is essentially CDW + protection against theft. Without LDW, you’ll be liable for the entire amount of replacing the lost vehicle.
The takeaway here is that, yes, while your car rental provider offers excess cover, it is unlikely to be the most cost-effective option, seeing as to how you’d have to basically buy the entire suite of add-ons.
And even then, you may still not be completely off the hook; some rental companies have two “levels” of CDW/LDW, with only the more expensive option offering 100% excess waiver.
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From your travel insurance plan
Some travel insurance plans offer rental car excess waiver, whether bundled in by default, or as a paid add-on. As its name suggests, this benefit covers you for any excess imposed by your car rental company.
Generally, any and all excess claims are covered, no matter what the originating incident is. So there’s less need for you to worry about what parts of your rental car are covered, or not.
However, this is still not a “blank-check” situation, as some restrictions may still apply. For instance, your travel policy may not cover damage to windows or tyres or some forms of damage or loss..
Also, the amount of excess waiver offered may not be large enough. For instance, FWD Travel Insurance offers S$1,000 in car rental excess waiver. If your excess exceeds this amount, you’ll have to cover the remainder on your own.
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From third-party providers
Another option is to purchase a rental car excess cover package from a third-party provider, such as RentalCover or Worldwide Insure.
This works similarly to the rental car excess benefit provided under a travel insurance policy; it covers you for the excess on your rental car policy.
And, depending on the actual package you sign up for, you may also be covered for other charges such as damage to tyres, windows and car underbody, road rage incidents, mis-fueling the vehicle with the wrong type of fuel, etc.
The difference is that a third-party rental car excess plan may offer up to unlimited waiver of all excess and incidental charges, such that you do not have to pay extra should your rental car get damaged or stolen.
You may find that in comparison to your rental car provider, third-party rental car packages may offer better value, providing all-round cover at a lower cost.
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A note on driving in West Malaysia
Oh, one more thing. If all you’re doing is driving up to West Malaysia, know that you may be able to get by with the motor insurance policy you obtained for driving in Singapore.
This is because most (if not all) motor insurance plans in Singapore cover for driving not only in Singapore but within West Malaysia and a little bit into South Thailand (typically, 80 km in).
However, you need to check with your insurer if your policy still covers you when driving a rental car – some insurers may not allow this.
Having said that, it might still be a good idea to get separate insurance for your out-of-Singapore road trip regardless.
Why? Well, because should you inadvertently get into a fender bender on the North-South Expressway, you can use your rental car insurance to settle any claims.
Otherwise, if you only have your primary motor insurance, you’d have to take a hit on your NCD, as well as risk having your premiums increased.
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