So, you’ve found a great car rental deal . It’s affordable, it’s a decent car, and maybe it’s even from a car hire company that you’ve actually heard of. Then, you get to the insurance upsell bit.
Suddenly, the cost of renting a car has shot up.
There are usually three insurance prices: basic (included), medium, and premium.
Basic car insurance is included in the cost of the rental, but the excess is usually incredibly high. The excess is what you pay if there’s an accident: If the excess is €1,000, and you cause €1,500 worth of damage, you pay €1,000 and the car rental company pays €500. If there’s €100 worth of damage, you’ll pay €100.
The second option reduces your excess and the insurance is usually a bit more comprehensive, while the premium option reduces your excess to €0.
The first option is a pure gamble and, here in Portugal where driving isn’t always the best, it’s only for the truly brave. The second option, meanwhile, is just a poor compromise as the excess is usually still in the hundreds.
The premium option obviously makes the most sense, but it’s also usually very expensive – sometimes more expensive than the cost of the car hire itself. That’s why more and more people are taking out car hire excess insurance.
Car hire excess insurance
Rather than take the premium insurance that the car rental company offers, it’s possible to buy your insurance from a separate, specialist company. This type of policy is usually called car hire excess insurance.
An annual car hire excess insurance policy typically costs around €50, which can even be cheaper than what you’d normally pay in insurance costs to hire a car for a week in Portugal.
There are several companies that offer car hire excess insurance for UK residents like:
You can either take out a single trip or an annual policy, and you usually have the option of European cover, worldwide cover, or worldwide cover excluding the USA and Canada.
Update: Unfortunately, post-Brexit, most of these companies have stopped offering policies to residents of any country besides the UK (and occasionally Ireland or the US).
When it’s not worth it
If you only plan on hiring a car once or twice a year, and if your insurance costs are going to be roughly the same as an annual car hire excess policy, it’s probably not worth it.
It also mightn’t be necessary if your credit card provides car insurance as one of its perks. This usually only applies to people living in the USA where credit card perks are typically better, but if you have a premium credit card you may have this as a perk.
How it works in practice
In practice, you’ll simply select the first, basic car insurance option – the one with the high excess. This means that the car hire company will want to block a deposit on your credit card to cover the excess (typically €500 or more).
They’ll probably also still try and sell you their insurance policy, but you are under no obligation to take it. This is more the case with the lesser-known car rental companies, but it could happen with any of them.
If you have an accident, they’ll take the money from your credit card to cover the damages. You will then need to make a claim with the car hire excess insurance company, so make sure you get every bit of paperwork that you can. Once processed, the insurance company will then refund you.
Rent from reputable companies
Just because you have this insurance policy, that doesn’t mean that you shouldn’t be cautious about which car rental company you go with.
Take photos of the car
Before driving away in your rental, take photos of any damage that you see on or inside the car. You may have insurance, but it’ll be much easier if you can dispute it when you bring back the rental rather than having to make a claim with the car hire excess insurance company.
Consider getting two credit cards
If your credit card allowance is low, or similar to the amount that the car rental company will block, you may want to consider getting a second credit card: one for normal spending or emergencies and one to use when hiring a car.
Compare prices for the best deal
Use comparison websites to find the best car rental deals. Some of the best sites for this are:
Get familiar with driving in Portugal
It’s worth reading through the guide to driving in Portugal. It’ll give you an idea of what to expect, and also inform you of a few different rules that you may not have in your country.