Car Hire Excess Insurance Explained (UK)

Car hire excess insurance is an optional policy that reimburses you for the excess you would otherwise have to pay if your rental car is damaged or stolen. The excess is the first slice of any repair or replacement cost, and on a UK or European hire that can run from £500 on an economy car to £2,000 or more on a premium model. With this cover in place, you claim that money back rather than losing it.

It is not legally required, and it is not the same as the Collision Damage Waiver (CDW) already built into most rental prices. CDW caps your liability at the excess; car hire excess insurance covers that remaining excess. Buying a standalone policy before you travel usually costs a fraction of the equivalent product sold at the rental desk.

Last updated: September 2026

Written by the Free Price Compare editorial team | Reviewed September 2026

What does car hire excess insurance actually cover?

Car hire excess insurance covers the excess a rental company charges you when the hire car is damaged or stolen, so you recover that money instead of losing it. On most rentals the Collision Damage Waiver (CDW) already limits your liability to a set excess, and this policy reimburses that excess amount up to the limit stated in your policy documents.

Cover limits vary by provider. Standalone policies commonly reimburse up to around £6,500 to £12,000, with some premium products going higher. Many also cover parts of the car that the rental firm’s CDW often excludes, such as tyres, windscreen, wheels, the undercarriage and lost keys. Because those exclusions are where surprise charges tend to appear, the extra scope is a large part of the value.

Excess reimbursement insurance is the formal name for this product, sometimes shortened to ERI. Whichever brand name a seller uses, the mechanism is the same: you settle the charge with the rental company, then reclaim it from your excess insurer. Always read the Insurance Product Information Document (IPID) before buying so you know the limit, the exclusions and how claims are handled.

Is car hire excess insurance the same as Collision Damage Waiver?

Car hire excess insurance is not the same as Collision Damage Waiver. Collision Damage Waiver (CDW) is a rental-company product that caps how much you pay if the car is damaged, usually reducing your liability to a fixed excess. Car hire excess insurance is a separate policy that reimburses that remaining excess.

Think of them as two layers. CDW is normally bundled into the advertised rental price and leaves you owing the excess. The rental desk then tries to sell you a “super CDW”, “excess reduction” or “zero excess” upgrade to wipe out that excess, and that upgrade is the expensive one. A standalone excess policy does the same job by refunding the excess after the event, at a much lower price.

One point often missed: CDW and Theft Protection usually still exclude certain damage, such as to glass, tyres and the underside. A separate excess policy tends to cover those excluded areas, which is why buyers describe it as a belt-and-braces approach rather than a duplicate of the rental firm’s cover.

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How much does car hire excess insurance cost?

Car hire excess insurance typically costs a few pounds a day for a single trip, or a modest annual fee for European cover. Annual worldwide policies usually cost more than European cover, reflecting the wider geographic scope. Prices vary by provider, cover limit and the countries included.

The comparison that matters is against the rental desk. Buying “super CDW” or “zero excess” at the counter typically costs significantly more than buying standalone cover in advance. Over a week away, a standalone annual policy bought in advance can work out much cheaper than the equivalent desk product, while covering the same excess.

If you hire a car more than once a year, an annual policy usually pays for itself on the second trip. Occasional renters may find a single-trip policy is enough. Either way, the same logic that drives down your normal everyday car insurance costs applies here: compare before you buy rather than accepting the first price put in front of you.

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Why is the rental desk version so much more expensive?

The rental desk version is more expensive because selling excess-reduction cover at the counter is a major profit line for rental companies, priced per day rather than per trip. Staff are incentivised to sell it, and at pick-up time, with a queue behind you and a large excess figure in front of you, many people agree without checking the alternative.

A standalone policy bought in advance strips out that counter mark-up. The regulator has looked hard at similar add-on insurance sold at the point of sale: in September 2023 the Financial Conduct Authority (FCA) reported that for Guaranteed Asset Protection (GAP) insurance only 6% of premiums were paid out in claims, and several firms paused sales over fair-value concerns, according to the FCA. Car hire excess insurance is a different product, but the lesson is the same: point-of-sale add-ons often carry a steep mark-up, and shopping around beats buying at the desk.

Another cost driver is location. The same car can carry a higher excess at an airport branch than at a nearby city-centre branch, with a material surcharge added on top. A standalone excess policy reimburses the excess whatever branch you collect from, so it neutralises that location premium.

Do I actually need it if the rental already includes insurance?

You do not legally need car hire excess insurance even when the rental includes cover, but the “included” insurance almost always leaves you owing the excess. Most advertised rentals include CDW and Theft Protection that cap your liability, yet still expose you to a sizeable excess if the car is damaged or stolen. Excess insurance covers that gap.

Whether it is worth buying depends on your appetite for risk and how much excess is at stake. If the car has a low excess and you would happily absorb that, you may skip it. If the excess is high and a scraped alloy or cracked windscreen would trigger it, the daily cost usually looks like sensible protection. Weigh the daily cost against the excess you would face and how likely a knock is on your trip.

Read the rental agreement’s own terms carefully. Some rentals sold as “fully inclusive” or “zero excess” remove the excess, in which case separate cover adds little. Many do not, and that is where a low-cost standalone policy earns its place.

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How does a claim work, and do I pay first?

A car hire excess claim works on a reimbursement basis: with most standalone policies you pay the rental company first and then claim the money back from your excess insurer. If the car is damaged or stolen, the rental firm charges the excess (often to the card on file), and you submit that charge, plus evidence, to your excess insurer for reimbursement up to the policy limit.

Because you settle upfront, you need a payment card with enough available credit to cover the excess, which could be £1,000 to £2,000. This is a common trip-up: the excess policy does not stop the rental company taking the excess, it refunds you afterwards. Keep the rental agreement, the damage report, any repair invoice and photographs, as insurers ask for these to process a claim.

To speed reimbursement, note the damage on the rental firm’s paperwork at drop-off and get written confirmation of the amount charged. Missing or vague documentation is the main reason claims stall. If you understand how a standard excess operates on your own policy, the mechanism will feel familiar; our guide to car insurance excess explains the wider principle in plain terms.

How is this different from your normal car insurance excess?

Your normal car insurance excess is what you pay towards a claim on your own vehicle before your insurer covers the rest, whereas car hire excess insurance reimburses the excess charged by a rental company on a hired vehicle. They are separate systems that use the same word.

On your own policy the excess splits into two parts. The compulsory excess is set by the insurer and cannot be changed; the voluntary excess is the extra amount you choose to add, which can lower your premium but raises what you pay if you claim. Choosing a higher voluntary excess is a well-known lever on price, and it interacts with things like no-fault claims, at-fault claims and whether a car is written off as a total loss.

None of that applies to a hire car. There, the rental company sets a fixed excess and you either accept the risk, buy reduction at the desk, or hold a standalone excess policy. Many car insurance quotes are for comprehensive cover, and even fully comprehensive drivers still face the rental firm’s separate excess abroad, so the two products do stack rather than overlap.

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What to check before you buy a standalone policy

Before buying a standalone car hire excess policy, check the cover limit, the exclusions and whether the countries and vehicle types you need are included. A policy with a lower reimbursement limit may be fine for a family hatchback but may fall short on a premium car with a higher excess. Match the limit to the excess you expect to face.

• Cover limit: confirm it comfortably exceeds the rental firm’s excess for your car group.
• Excluded parts: check the policy covers tyres, windscreen, glass, undercarriage and keys, as these are common CDW exclusions.
• Territory: European, worldwide and USA/Canada cover differ; some worldwide policies still exclude certain countries.
• Vehicle type: standard car policies often exclude vans, minibuses and prestige models, which need specific cover.
• FCA authorisation: only buy from a seller authorised and regulated by the Financial Conduct Authority.
• Payment: make sure you hold a card with enough available credit to pay the excess upfront.

Buying at home before you travel is where the saving sits, and it removes the pressure of deciding at the counter. If you are already reviewing your motoring costs, it is worth reading our UK car insurance money-saving tips and, if you hire cars often, checking the questions to ask when comparing quotes so the same discipline carries across every policy you hold. Drivers dealing with a rental after a crash on their own car should also review their courtesy car rights.

• How to Save Money on Car Insurance – FreePriceCompare
• 10 Questions for Comparing Car Insurance Quotes | FreePrice
• Top 253 Tips to Lower Your Car Insurance Costs in the UK
• Car Insurance Excess: Does Increasing It Really Save Money?
• Cheap Car Insurance Tips – Slash Your Premium in the UK

Information correct as of 3 September 2026. Prices, tariffs, policy details and providers change frequently, so please check the latest details before making a decision. This article is for general information only and does not constitute financial advice. Free Price Compare is authorised and regulated by the Financial Conduct Authority (FCA).