When hiring a car, stop before you pay the excess cover

The price you pay for insurance at the rental desk is unlikely to be a bargain, warns Chiara Cavaglieri

The Easter break is a bumper period for car hire firms with Britons travelling to spend time with the family and taking trips abroad over the long weekend.

Finding a good price for a hire car is hard enough, but finding appropriate insurance can involve even more hassle and expense. One of the issues is that car-hire excess levels can be astronomical. Some firms set them as high as £500 and although they offer additional cover to bring this down, the extra insurance is also pricey.

"That's the way these companies work; they offer a cheap rate for hire but when you get to the counter you're sold an additional service where they make their money," says Ernesto Suarez, chief executive of insurance provider icarhireinsurance.com.

One way around this is to bypass the excess insurance policies sold at rental desks and buy standalone cover.

Dailyexcess.com, for example, charges £4.75 a day for worldwide cover, while icarhireinsurance offers excess policies for Europe from £2.99. Compared to the £9.99 per day that rental companies can charge, the potential savings are substantial. As well as being more expensive, not all hire firms will cover damage to windows, tyres or undercarriages, which many standalone providers cover as standard.

The problem, however, is that this means taking out yet another insurance policy, but there are other options. At, for example, Holiday Autos, a major UK car rental broker, and Hertz, customers can pay for excess insurance reduction as part of the booking process. However, research from comparison site Travelsupermarket.com shows that the prices from standalone providers still come out on top.

They found that, based on one week's rental in Alicante from 17 April 2010, Holiday Autos charges £33.25 for its "total damage excess waiver", and "Super Cover" from Hertz, which reduces the excess to nil, costs £47.14.

"In comparison, icarhireinsurance charges £23.94 for a week or £39.99 for an annual product so it appears to be very good value in comparison to the two companies we selected at random," says Bob Atkinson, spokesman for Travelsupermarket.com.

Anyone considering taking out one of these standalone polices should read the terms and conditions carefully, checking for any exclusions.

Standalone providers will also have some immediate restrictions, although these are usually in line with those set by the car-hire firms. Both icarhireinsurance.com and dailyexcess.com, for example, only offer cover for those aged between 21 and 74. Most standalone providers offer cover for Europe and the rest of the world, but not the UK. However, icarhireinsurance offers annual policyholders the chance to pay an extra £19.99 a year for excess cover for car club use.

Although the vast majority of car clubs – which rent out vehicles on an hourly basis to members in some big cities – offer fully comprehensive insurance, as with car hire firms, the excess levels can be very high, sometimes as much as £1,000. Again, the car clubs offer extra cover to reduce this, but many charge over the odds.

"Car clubs in the UK are doing the same thing as car rental companies, charging their members too much for the extra insurance," says Mr Suarez.