What’s the difference between car hire insurance and car hire excess insurance?

When you hire a car, the term “insurance” can mean different things. And that’s where people get caught out.

Car hire insurance usually refers to the rental company’s waivers and cover, like Collision Damage Waiver (CDW), Loss Damage Waiver (LDW) and theft protection. These don’t always cover everything and often come with an excess. Car hire excess insurance is a separate policy that can reimburse you for the excess you’re charged.

 Understanding the difference helps you know what you’re paying for, what’s covered, and what could still cost you money.

 In this guide, we explain what each type of insurance means, how they work, and what to check before you book and at the rental desk.

Car hire insurance is often used as a catch-all phrase. What’s included varies by rental company, booking channel and destination. In a typical rental agreement, you might see: 

• CDW/LDW — linked to damage and sometimes loss of the hire car.

• Theft protection — linked to the car being stolen (with conditions).

• Third-party liability — Covers injury or damage you cause to other people or their property.

 Even where cover is included, you might still be responsible for:

•   An excess — The amount you have to pay towards a claim.

•   Exclusions — Parts of the car or situations not covered.

•   Conditions — Rules you must follow (like reporting damage quickly).

 So even with "insurance included", you could still face significant charges if something goes wrong. 

CDW is a waiver that limits what you pay if the hire car is damaged. It typically reduces your financial responsibility, but doesn’t remove it completely. You might still be liable for: 

• An excess amount

• Damage not covered under the waiver

 CDW might also include conditions, such as how quickly you must report damage and what evidence you need. Always check the rental terms so you know what’s included and what’s excluded.

LDW is often a broader version of CDW. Depending on the provider, it might cover certain types of damage and loss under one waiver.

 Theft protection limits what you pay if the car is stolen, but:

• It usually comes with an excess

• Terms and exclusions can vary widely

 The name matters less than the actual wording in your documents. Two companies may use the same term but offer different cover.

Car hire excess insurance is typically a standalone policy that reimburses you if you’re charged an excess under the rental agreement, subject to the policy’s terms.

 It doesn’t change the rental company’s cover or terms. Instead, it acts in the background:

• You pay the hire company for damage or theft (if applicable)

• You then claim back the cost from your excess insurance provider

 Some excess policies also cover damage to areas like glass, tyres or the underbody, but others don’t. Always check the exclusions.

Excess reimbursement often works like this: 

• An incident happens

• The rental company charges you up for the excess under the hire terms

• You gather documentation (rental agreement, damage report, invoices, photos)

• You claim from your insurer/provider and may be reimbursed if the claim is accepted under the policy terms

 Because the hire company charges you first, you need to be able to pay upfront. 

These can sit alongside each other. The rental company’s waiver/cover reduces your liability under the hire agreement, and excess reimbursement cover may then reimburse what you’re charged, depending on the policy.

 Rather than wondering which one you should buy, it’s more helpful to check: 

• what’s already included in the rental price

• what excess you’d be responsible for

• what a separate policy would reimburse

• What’s the excess amount, and when does it apply?

•    What is included (CDW/LDW/theft/liability)?

•    Are common exclusions listed?

•   If charged, can I afford to pay upfront and claim later?

Exclusions vary, but common things to watch out for might include: 

• Tyres and wheels

• Glass or windscreens

• Underbody or roof damage

•  Lost keys or misfuelling

• Towing or roadside assistance

• Admin fees or negligence-related charges

 Always check the rental agreement and policy wording. “Covered” often means covered within limits.

Before booking 

• Excess amount and when it applies

• What cover is included (CDW/LDW/theft/liability)

• Deposit/pre-authorisation amount and card requirements

•  Additional driver rules and costs 

At the desk 

• Confirm the excess and what options change it

• Ask what common exclusions apply

• Keep copies/photos of any cover summary or agreement

 At pick-up 

• Inspect and photograph the car

• Ensure existing damage is recorded

•  Know who to contact and how to report an incident

Car hire insurance is a rental company’s waivers and protections, and often involves excess. Car hire excess insurance is a separate policy to reimburse you for the excess you’re charged, subject to its terms.

 If you check your rental agreement and any policy wording before you travel, you’re far less likely to face unexpected costs at the desk.

 If you’d like to understand what car hire excess insurance can include, explore Everywhen’s car hire excess insurance options, or get in touch.

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought. 

 insurance4carhire is a trading name of Atlanta Insurance Intermediaries Limited. Authorised and Regulated by the Financial Conduct Authority under firm reference number 309599.