Rental Car Insurance Market Report (Winter 2025/2026): Why Rental Car Insurance Rates Go Up?

Are Rental Car Insurance Costs Rising?

As we head into Winter 2025/26, travellers face the most expensive rental car excess reduction landscape in years. Across almost every monitored market, the daily cost of “Super CDW” (zero- or low-excess cover bought at the rental counter) has increased year-on-year, while average excess liabilities (deductibles) have also climbed in most countries.

The clearest trend: rental companies are quietly pushing more risk onto customers and then charging record prices to buy it back at the counter.

How have Rental Car Insurance Prices Changed in the Past year?

Rental Car Insurance in Australia – The Sharpest Increase

Australia remains the world’s most expensive major rental market for excess insurance.

Australia saw 12.7% jump in excess liability from AUD$ 47.23 to AUD$ 53.21 per day.

 
Note: Europcar almost doubled its daily rate in one year. Even “budget-friendly” Thrifty dropped its rate to AUD 35, but the average was dragged sharply higher by the big players (Avis/Budget +15%, Hertz steady but already expensive).

Car Hire Excess Insurance in Europe – Steady but Relentless Upward Pressure

Europe-wide averages (France, Germany, Iceland, Ireland, Italy, Spain)

Rental Car Insurance in Germany

Germany surprisingly bucked the trend on price (-9% daily rate) but excesses still crept up slightly.

Car Rental Insurance Spain

Spain saw the biggest jump in excess liability: +37% (from €1,853 → €2,544) while daily rates rose 14% from €31.64 to €36.05.

Car Rental Insurance Italy

Italy now the most expensive in Europe: €40.82/day (+17% YoY) with excesses still averaging over €2,000.

Car Rental Insurance Iceland

Iceland – Gravel & Wind Protection Becoming Mandatory in Practice. Daily cost of the essential Gravel + Wind package fell very slightly, but the underlying CDW excess rose marginally. Travellers still face ~US$1,400–3,900 of risk without buying the expensive add-ons.

Car Rental Insurance in France

France and Ireland remain relatively moderate, but both saw daily rates rise ~7–10%.

Car Rental Insurance Ireland

What’s Causing the Increase in Rental Car Insurance Rates?

Key factors contributing to the seemingly increase in car insurance costs include:

Shortages in Supply Chains

The COVID pandemic significantly disrupted global supply chains, making some auto parts scarce and driving up their prices. This increased parts prices led to higher car repair costs, which in turn caused auto insurance rates to rise.

While supply chains and shortages have improved in 2025, they haven’t fully returned to pre-pandemic conditions. That keeps expenses high and makes car insurance more expensive.

Expensive Repairs and Parts

The cost of repairing vehicles continues to rise due to inflation, sophisticated technology in modern cars, and higher prices for parts. Every new car, regardless of its price, is equipped with high-tech computers that power entertainment and navigation features, emissions controls, and safety equipment. It’s no wonder that repairing a modern car is far more expensive than repairing most cars just a decade ago.

Climate Change

Climate change may lead to more frequent disasters—such as flooding, storms and wildfires—that put more vehicles at risk of harm. If catastrophic weather events cause more auto claims, insurers may try to pass those costs onto you through increased insurance premiums.

For example, according to Forbes, Florida is often confronted with hurricanes and tropical storms and has an average car insurance cost of $3,536 per year. Vermont, which isn’t prone to hurricanes and other catastrophic weather, has an average rate of $1,237. Given that climate doesn’t distinguish between a rented car and a private car, the same math, applies for rental car insurance.

Electric Vehicle Adoption

Governments worldwide are incentivizing sustainable transportation initiatives, encouraging rental companies to adopt eco-friendly fleets, which in turn influence insurance risk profiles. EVs may be good for the environment but they can be expensive for car insurance. Even the most affordable new EV utilizes dozens of expensive and delicate computer modules to control everything from engine and transmission operations to airbags, power windows, ABS, cruise control, and more. These costlier claims drive insurance rates higher.

Increase in the Theft of Vehicles and Car Parts

Vehicle theft rates have steadily risen since 2019, according to the National Insurance Crime Bureau. The NICB found that auto thefts surpassed 1 million in 2023, driving auto claims and car insurance rates higher. Unfortunately, this “trend” doesn’t skip rental car thefts.

Inflation

Rental car insurance is experiencing the effects of inflation, just like many other economic sectors. The cost of both new and used cars has increased dramatically in recent years. Auto parts needed for repairs have become more expensive, as have labor costs in the repair shops.

Slower Claims Can Cost More

Many drivers are finding the claims process takes a lot longer now. The average repair time is 22 days, up from 12 days pre-pandemic. That’s according to a 2024 J.D. Power Survey of more than 9,700 auto insurance policyholders who settled a claim recently.

Assuming that the rental car company wish to cover the loss from the inability to rent the damaged vehicle during extended repair periods, it costs them significantly more per year in claims.

Why Rental Companies Charge So Much

Rental companies price insurance high for several reasons:

1. Profit center: Insurance has 60-80% profit margins vs. 10-20% on vehicle rental
2. Counter conversion tactics: Sales pressure during pickup when customers feel vulnerable
3. Captive audience: Limited alternatives once you’ve committed to renting
4. The Consumer Awareness Gap: According to our recent study – 77% were unaware that third-party car rental insurance existed.

Getting Cheaper Rental Car Insurance

Rental car insurance has become one of the most controversial aspects of car rental, with travelers often feeling trapped between expensive coverage options at the rental counter and potentially catastrophic financial exposure if they decline protection.

CarInsuRent offers standalone rental car excess insurance that travelers purchase before their trip, providing significant cost savings while maintaining comprehensive protection.

CarInsuRent Coverage: What You Get

CarInsuRent policies typically cover:

1. Collision Damage Excess
   • Reimbursement for excess charged by rental company after accidents
   • Coverage up to policy limits (typically $2,500-$4,500)
2. Theft Excess
   • Covers excess if vehicle is stolen
   • Includes attempted theft damage
   • Keys/lock replacement costs
3. Window and Glass Damage
   • Windshield, windows, mirrors
   • Headlights and taillights
   • Often excluded from rental company CDW
4. Tire and Wheel Damage
   • Punctures, blowouts, rim damage
   • Common exclusion from standard CDW
   • Essential for gravel roads (like Iceland)
5. Undercarriage Damage
   • Bottom of vehicle damage from rough roads
   • Critical for countries with poor road conditions
   • Usually excluded from basic rental coverage
6. Towing and Recovery
   • Costs to recover broken-down or stuck vehicles
   • Particularly important for remote areas

Technological advancements such as AI-powered risk assessment tools are revolutionizing CarIsnuRent’s underwriting processes, enhancing pricing accuracy and customer experience.

If you’re looking for tips for cheaper rental car insurance – Pay annually. Whether you rent frequently or plan an extended trip, our comprehensive car rental excess insurance policy ensures you’re covered all year round, saving you money and hassle with every rental. Avoid unexpected costs on your next car rental with Annual Car Hire Excess Insurance starting at just US$114.90.