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How does Excess Reduction & Third Party Insurance work in Australia and New Zealand

Excess Reduction/Excess Waivers in Australia and New Zealand

Rental vehicles in Australia and New Zealand do not have Collision Damage Waivers (CDW). CDW is a policy sold by rental companies elsewhere in the world that reduces the excess that is payable in the event of an accident from the full value of the vehicle towards a lower limit (under AU$5,000, usually). CDW (and Loss Damage Waivers (LDW), which is just CDW plus Theft Protection) is included by default with a rental car (or can otherwise be included at the rental desk) in every country except Australia and NZ. If a renter does not have CDW or LDW in Europe, North America and South America their liability in the event of an accident would be the full value of the car. In Australia/NZ however, there is no CDW/LDW; the default liability (called "standard excess" or "standard liability") is usually somewhere below AU$5,000, although some large motorhomes have an excess of AU$7500.

The excess waivers for this lower amount are similar to Europe:
  1. The rental companies sell products that allow you to decrease the excess that you pay after an accident from the above range towards $0. In Australia and New Zealand these policies are usually called "excess reduction", "damage waiver" or "excess waiver" (while in Europe they are usually called "Super CDW" or "Super LDW" and in the US they do not exist).
  2. Excess reduction as sold by rental companies is overpriced (RentalCover.com's "Zero Excess Rental Cover" is at least 50% cheaper).
  3. Excess reduction from the rental companies have many questionable exclusions, such as windscreens, tyres, mirrors, glass, single vehicle accidents, interiors, underbody and roof damage (RentalCover.com provides coverage for all types of accidents and damages).
  4. To provide coverage to the above, the rental companies have more and more expensive policies, making the prices worse and worse in comparison to RentalCover.com's policies. Try the Comparison Tool above to compare your rental company.


Third Party Damages

If you are driving a rental vehicle in Australia or New Zealand and you are involved in an accident with another vehicle the following process takes place:

1. If you cause the accident (i.e. you are "at fault") and damage another car

You will have to pay the repair costs for your vehicle (which would be insured by your RentalCover.com policy). A small number of motorhome rental companies may also charge you for damages to other vehicles. These "third party damages" are excess charges (i.e. deducted from your credit card) and are insured by your RentalCover.com policy. 

2. If you didn't cause the accident (i.e. you are not "at fault") and damage another car

In Australia and New Zealand, rental companies are known to gouge their customers, and have been recently prosecuted for their conduct. One trick is how they charge their renters for accidents even if their customers were not "at fault" in an accident. While it might be reasonable to expect to not have to pay for any damages if you did not cause the accident, the rental companies will always charge you for your vehicle's damages. A minority of rental companies will refund you at a later date if you are proven to be not at fault, however most don't, meaning they collect your excess charge and then get the repairs reimbursed by the other driver's insurer. On the other side of the coin, if the renter was at fault, the rental companies usually don't have to wear the repair costs anyway because their cars are fully insured. The outcome is that they make a profit if their driver was at fault, and they make a profit if the driver was not at fault

We are fighting for this practise to change and not surprisingly many regulators have cracked down on the questionable policies of rental companies and the ACCC has sued Hertz and Europcar two years in a row. In the above comparison tool we have included information about the "not at fault" terms and conditions for the main rental companies in Australia and New Zealand. 

It is worth noting that third party charges (damage to another car) are also slugged by some rental companies (particularly motorhome rentals) even if the renter was not at fault. Those charges are insured by RentalCover.com though we are fighting for the rental companies to change their ways. 

3. If you cause an accident and injure the other driver 

If the other driver is injured, the owner of your vehicle (i.e. the rental company) is liable, however the liability is mitigated by compulsory schemes for third party injuries in Australia and New Zealand. This is similar to Europe: the rental company cannot own or rent a car without having third party liability insurance, and as a result, renters do not have any liability (unless you have broken the law). 

In Australia, "third party cover" is provided by a private insurance company, whereas in New Zealand a government insurer called ACC looks after all injuries caused by motor accidents (it is a "no fault" scheme, which means there is no settlement process nor ongoing legal/claim issues for the drivers). 

4. If you did not cause an accident and you are injured 

The liability for your injuries rests with the other driver, who would have the same compulsory insurance that your rental company has for their cars. Your medical costs will be insured by their insurance.

 

Example of Third Party Damages

RentalCover.com customer Lars Ulrich is taking a holiday in Adelaide over the summer to sight see the city's historic postboxes because he has got a day to kill and the Adelaide guidebook has been out of print since 1890. Forgetting that Australians tend to drive on the wrong side of the road, Lars set off on his adventure in a slightly more dangerous fashion than he should have, and as a result he is involved in a head on collision with a Skoda.

While Lars is left unscathed, and the other driver only suffered minor shock from meeting Lars Ulrich the frontman from Metallica, Lars is still worried that he may end up having to fork out thousands of dollars for car repairs because he was "at fault" in the accident. However, when he informs RentalCover.com of the accident he is pleased to learn that his policy will provide coverage not only for the repair costs that form part of his excess charges, but also a few hundred bucks that the rental company slipped in for damages to the other driver's Skoda. He doesn't understand how that all happened but he is happy RentalCover.com is across it and happy to reimburse him. Pleased with his decision he heads off to visit one of Adelaide's leading philatelists to buy some rare stamps and further develop his other lifelong passion.

 

Example Process for "Not At Fault" Accidents

RentalCover.com customer Kanye West has rented a Hummer in Sydney to get to the Opera House for the first performance of his Australian tour. Despite being the world's best driver, Kanye is unable to avoid being hit by a driver who is rushing to get in the front of the line for Kanye's show, and both cars are totalled ("written off" in local parlance).

Unfortunately for Kanye, he made the first mistake in his life. The rental company he chose will slug him for the cost of his damages, even though it was his fan's fault. His fan even has a signature and an Instapic to prove it was his fault but the rental company doesn't care. Kanye sends Kim an Instagram where he describes, only in emoticons, what happened and asks her to find out if he'll get a reimbursement at some stage for the accident he didn't cause. Without averting her gaze from her phone, Kim checks the rental company's terms and conditions, notices the absence of any policy regarding "not at fault" damages, and sends a 160 character screed to the rental company asking why they won't refund her hubby sometime in the future. The rental company decides that they'll defy the 700 billion people who are flaming them with emoticons in the Insta/Facebook/Twitter-verse. So no refund for Kanye.

But Kanye doesn't mind, RentalCover.com has paid him for the repair costs by the time he slid on his gold pantsuit for the show, anyway. 

 

Example of a Single Vehicle Accident

RentalCover.com customer Noel Gallagher has an accident while driving a motorhome in New Zealand after his GPS directs his rental car into a fjord. His GPS had been damaged by a kick it received when bad music came on the radio. The rental company deducts the full excess of $5000 from his credit card plus $200 for the damaged GPS. The excess gets reimbursed through his RentalCover.com policy, which he ensured has $5000 coverage, and the GPS replacement cost is insured by RentalCover.com's Free Gap Coverage. He later called us to say thank you, "So don't look back in anger," we heard him say. 

 

Example of Third Party Liability in Australia and New Zealand

While driving locally, New Zealand's finest export Lorde doesn't notice a passenger in another car opening their car door until too late. Lorde's rental car snaps off the other car's door and the other guy dislocates his thumb in the process. Fortunately for Lorde, New Zealand has a universal insurance provided by the government, meaning she can't be sued. 

Meanwhile in Australia, a freakishly similar thing happens to her mate, Gotye. Travelling through a supermarket car park at 5km/h in a rented van, Gotye can't miss a moment of inspiration and reach into his glovebox for a pen and music notebook. He unfortunately sideswipes a parking attendant, whose injuries are minor and is looked after through the mandatory third party liability insurance held by the rental car owner. 

 

Summary

In summary, if an accident occurs:

  • Injuries to drivers of the other car are insured by third party liability insurance. Third party liability cover is compulsorily held by vehicle owners. Drivers of rental vehicles have no liability for the other driver (unless you were breaking the law, e.g. driving under the influence of alcohol/drugs, etc.)
  • Damages to other cars that are charged out of your excess (and usually called "Third Party Damages" on the bill) by the rental company are always insured by RentalCover.com.
  • Regardless of who is "at fault", you will be required to pay for damages in any single or multi-vehicle accident. RentalCover.com reimburses you those costs straight away and if we determine that the rental company would otherwise reimburse you later on, once their insurer successfully claims from the other driver's insurer, we will collect the funds on your behalf. More information will be provided during the Claims process. Most rental companies do not reimburse their drivers if they are not at fault. 
  • Our policies provide coverage to excess payments that you make to the rental company, so of course we provide coverage to third party damages! Whatever is on the final invoice, we pay!

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Country: Asian Countries

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How does Excess Reduction & Third Party Insurance work in Australia and New Zealand
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