jackal

This is exactly the same situation as in the U.S. Rental car fleets are self-insured, and rental agencies are not allowed to call it insurance due to licensing restrictions. It is always referred to as "coverage" or "protection."

I always found this interesting. It seems to me that you're getting less for more. In the U.S., it costs ~$20/day to provide effectively $30,000 (or whatever) in coverage. In Australia, since all but ~$3,000 is already covered, that same $20/day more or less only "buys" you $3,000 in coverage. And with many companies, that still leaves you responsible for a ~$300 excess. It just seems like a bad deal compared to the way it works in the U.S. "Excess reduction cover" should be lower cost in Australia than full CDW in the U.S.

Thanks for bringing this up and clarifying how things work in Australia. I've heard much of it before, but it's never been pieced together in one comprehensive place. I appreciate it.

For comparison purposes, in the U.S., legal liability, third-party property damage, and no-fault injury cover are bundled together in what is called "third-party liability."

Third-party liability is broken up into two components: property damage and bodily injury. Property damage covers damage to the third party's vehicle, and bodily injury covers medical bills as well as other costs such as lost income and other things the third party may sue you for. Third-party policy coverage limits in the U.S. are expressed as ##/##/##--bodily injury per person, bodily injury total per accident, and property damage total per accident, measured in thousands. For example, I have a 100/300/100 policy, meaning my policy will pay out $100,000 per person (in the third-party vehicle) up to $300,000 total and cover $100,000 in property damage. State minimums in Alaska are 50/100/25, which is higher than most other states (California and Pennsylvania are 15/30/5). If the damage exceeds my policy limits, then I am personally responsible for the rest, so people with a lot of assets tend to have higher coverage limits or significant umbrella policies.

On a related note, third-party liability purchased from rental companies in the U.S. has a $1m aggregate limit (no restriction on per person or property damage--just a total $1m maximum payout), so it can still be of value to people concerned about risk to their assets.

No type of insurance is included in the vehicle registration cost, but most (all?) states require vehicles to be covered with a third-party liability policy. Of course, it is technically possible to register a car and drive without insurance, and many times, people who are driving on suspended licenses (after a drunk driving conviction) will often be driving without insurance, since they cannot legitimately obtain such coverage.

In the U.S., basic third-party liability only covers damages to third parties--no coverage for people in your car or your own vehicle. Therefore, if you are hit by someone driving (illegally) without insurance or by someone with extremely low coverage limits (say, state minimums only), you will get nothing--unless you purchase another product known as uninsured/underinsured motorist protection.

I'm actually not clear on what product pays out for bodily injury in a no-fault situation. Property damage in a no-fault situation would be paid out by the driver's own collision coverage (assuming he/she has that coverage--people driving older, less valuable cars may not).

My understanding, too. In fact, most places outside the U.S. seem to operate like this.

Australian cards don't need to include CDW for Australian or European rentals--as long as they DO provide excess reduction cover. Is that ubiquitous among credit cards over there?

And U.S. cards don't need to provide CDW for Australia, but they SHOULD provide excess reduction cover. I wish they would.

Not all, by any means, and I do appreciate the comprehensive breakdown of Aussie insurance practices! I will be bookmarking this thread for my own future reference!