Car Rental Insurance in Australia – Don’t Overpay

Renting a car in Australia is easy… until you see the insurance options. Some travellers pay hundreds more than they should; others skip insurance and end up with bills of $5,000 or more.

In this guide, I’ll explain everything you need to know about car rental insurance in Australia — what’s included, what’s not, and how to save money without taking risks.

But let’s have a start by talking about the insurance levels that are mandatory and optional in Australia.

DISCLAIMER: I’m not a professional or legal insurance advisor. Everything I share here is purely based on my extensive personal experience from renting cars in Australia for the last 20 years. I’ll even throw in a few real-life examples of what’s happened to me!

The Types of Car Rental Insurance in Australia

When you rent a car here, you’ll encounter a few key types of insurance. It’s important to have a clear understanding before buying unnecessary policies or saving on important insurance.

1. Third Party Liability (TPL) Insurance
   
   • What it covers: This essential insurance covers damages or injuries to other people or properties, but importantly, not your rental car.
   • Real-world example: If you accidentally hit another car, the TPL will cover the damages to their vehicle.
   • What it doesn’t cover: You’d be completely out of pocket for any damage to your own rental car. That could be a huge blow!
2. Collision Damage Waiver (CDW)
   
   • What it is: Technically, the CDW isn’t insurance, but it’s a waiver designed to reduce your financial liability if your rental car gets damaged.
   • Is it mandatory? It’s not mandatory in Australia, but more often than not, it’s already included in your rental price. Always, always check your rental conditions to confirm it’s there.
   • The “Excess” in Australia: Here’s where it gets interesting – and potentially expensive! The excess amount on a CDW in Australia, which is the amount you’ll pay out-of-pocket before the insurer steps in, is usually between $5,000 to $7,000. That’s significantly higher than what you might find in other countries.
   • Why so high? A couple of key reasons:
     • Wildlife Encounters: Once you leave the cities, Australia’s got a vibrant, active wildlife scene. Kangaroos, wombats, and even wild goats in the outback can cause significant damage if you collide with them. My top tip here: Avoid driving during the night, sunset, or sunrise. This is when most of these beautiful, but potentially car-damaging, animals are most active. Personally, I never had any accident and I have been living in Australia for over 20 years, but I totally avoid driving at night outside of the cities. In saying that, a few of my friends had.
     • Unsealed Roads: There are plenty of unsealed (dirt) roads across Australia. It’s not uncommon to damage the bodywork or the underbody of your car on these routes.
   • How the excess works: Let’s say you have an accident and your car is damaged for $7,000, and your excess is $5,000. You would pay the first $5,000, and the car rental company would cover the remaining $2,000.
3. Theft Protection (TP)
   
   • What it covers: This insurance protects you if your rental car is stolen.
   • Is it common? Car rental companies usually include this in the daily fee, probably because car theft is quite rare in Australia.
   • Peace of mind: While rare, it can happen, so it certainly adds a layer of peace of mind, but I would not consider it a must-have.
4. Roadside Assistance
   
   • Is it included? Typically, roadside assistance is not included in the daily rental fee.
   • Is it worth it? In my opinion, it’s an absolute must-have, especially if you plan to explore regional Australia. You can often drive for hours between towns.
   • What it covers: Flat batteries, running out of petrol, getting locked out of your car, or simple engine issues.
   • Cost of not having it: If you’re in the countryside and have a problem without this insurance, it could cost you between $1,000 to $2,000 or more for a tow or assistance, as they might have to drive 200-300 km to reach you.
   • My strong suggestion: Make sure you absolutely have roadside assistance, especially if you’re planning to visit the Australian countryside – which, by the way, I highly recommend as it’s the best part of the country to experience! I once broke my car between Broken Hill and Mildura, and the insurance was a total life-saver

Understanding Full Insurance (Excess Coverage) – A Must-Have in Australia!

Given how high the excess is in Australia, full insurance is honestly a must-have when renting a car here. It covers most, if not all, of that hefty excess. But how much does it actually cost, and what are your options?

1. Check Your Credit Card Insurance
   
   • Potential benefit: Sometimes, your credit card might include coverage for car rental excess. This can be absolutely fantastic!
   • Read the fine print: However, you need to read the small print carefully. My card, for example, has its own card deductible, leaving me $1,000 out of pocket. Better than nothing, of course, but it doesn’t offer 100% coverage.
2. Purchase Insurance at the Rental Desk
   
   • The most expensive option: This is typically the most costly way to get full insurance, often setting you back between $20 and $50 per day.
   • Limited coverage: Even at this price, it might not cover the full excess, possibly still leaving you with a $300-$500 out-of-pocket amount.
   • My anecdote: Many years ago, I rented a car for $25 a day. When I wanted full insurance, they quoted me $30 a day, effectively more than doubling my initial planned cost to $55 a day!
3. Purchase Full Insurance via a Comparative Booking Website (My Go-To!)
   
   • My preferred method: For the last five years, I’ve been booking my rental cars through a comparison website called DiscoverCars . I love this website because it works as an Airbnb for car rental companies, where every provider is ranked between 5 and 10 stars by customer feedback.
   • How I do it: I usually filter for companies rated above 8 or even 9 stars to get a shortlist of trusted rental agencies. I then book from that list, simple as that. This helps avoid potential scams and ensures great service.
   • The bargain insurance: On top of that, I add full insurance directly on the website, which costs me only between AU$12 and AU$15 (8 and 10 US or Euros a day). This is an absolute bargain and offers such incredible peace of mind! It even includes roadside assistance. Whenever I rent a car, this is the full insurance I always add.

How Full Insurance Claims Work: Two Different Processes

There’s a key difference in how full insurance claims are handled depending on where you purchase it.

Insurance bought at the car rental company desk

This type of insurance usually reduces your excess to a small amount or even zero.

If you return the car with damage, especially if your excess was reduced to zero, you simply hand back the keys and the car, and you’re good to go, straight to the airport without a worry.

This convenience, however, is typically much more expensive, between $30 and $50 a day. Before committing to it, make sure it reduces the excess to zero.

Insurance bought on a booking website

If you damage the car, the rental company will still ask you to pay for the damage upfront. You then need to collect the invoice for the damage, along with your rental contract, and send it to the comparison website DiscoverCars to make a claim.

You’ll usually receive your refund within one or two weeks. So, you will be out of pocket for that amount for a few days.

Three years ago, I rented a car for a camping trip and unfortunately scratched it, causing $4,000 worth of damage. Luckily, I had taken full insurance on the booking website. I paid the $4,000 to the car rental company, then submitted my claim and received the refund two weeks later. It was as easy as that.

The trade-off: If you’re renting for, say, two weeks, buying insurance on a website can save you $400-$500. The trade-off is that extra step of claiming the money back if you damage the car, but it’s not a major issue, just something to be aware of.

My Recommended Strategy for Peace of Mind & Savings

My personal recommendation for car rental insurance in Australia, and indeed for most places, is to book your car and make sure to include full insurance before you actually arrive at the counter.

In this way, you will have a clear idea of what you are going to spend. Arriving at the desk without full insurance will leave you without any option if not accept the lucrative daily cost or take the risk during your road trip, which I personally do not suggest, considering the high excess.

I personally like organising my rental and insurance on a single website, DiscoverCars, so I have a unique point of contact in case of any issue.