Car hire insurance can be seen as trying to achieve two principal objectives:

• providing you with a level of insurance cover that is required by law before a vehicle can be driven on the roads in practically every country you are likely to be driving; and
• providing you with a level of financial protection (an indemnity) against the cost of replacing the vehicle or having it repaired if it is stolen, lost or damaged whilst in your care.

The first of these, of course, is designed to ensure that you meet at least the minimum legal requirement to drive the vehicle you have hired.

Problems can arise, however, because cars are expensive pieces of equipment and can cause considerable damage and/or injury to third parties. Claims involving your hired vehicle, therefore, could involve such considerable sums of money that the insurance cover provided by the bare minimum of insurance is unlikely to offer you complete financial protection – you remain exposed to the risk of bearing any uninsured losses personally, from your own pocket.

In some countries, for example, the bar is kept relatively low as far as the legal requirement for cover for third party claims is concerned. In other words, you could be faced with potentially huge uninsured losses if you are found liable for serious injury or damage to a third party or parties. There are instances, therefore, when Supplemental Liability Insurance may prove a very prudent addition to your car hire insurance.

But it is not just third party claims, of course. The vehicle you have rented is also a valuable and expensive piece of machinery. It could be damaged in any number of different ways, it could be stolen, it might even be so seriously damaged as to be written off and have to be replaced. A closer examination of the car hire insurance offered by your vehicle rental company is likely to reveal that there would be insufficient cover in place to meet all such losses – and without that cover, of course, you will be held personally liable.

The reason for gap between the car hire insurance that is in place and the potential losses that could be incurred is typically the result of an insurance excess that you agree with the rental company and the exclusion of certain areas of the hired vehicle from such insurance (typically, the windscreen and windows, tyres, wheels, top and underneath of the vehicle).

In order to close that gap, therefore, you might want to consider taking out separate car hire insurance from an independent provider in advance so that you have an insurance package that includes any excess insurance, full cover for any theft of loss or damage to the vehicle, and enhanced financial protection against any third party claims.

Related posts:

1. What might you need from your rental car hire insurance?