Rental Car Insurance - worth it, or not?

DO NOT take this post as advice of any kind. Read your rental car policy thoroughly and make your own decisions.

Recently my wife and I hired a car for two weeks from Avis, Australia. I decided, as I always do, to not take the "insurance" that was on offer. Unfortunately a car park accident during this trip has made me rethink my position on rental car "insurance". Rethink, but not change my stance.

What most people do not realise is that ALL rental cars are insured regardless of you paying the extra for "insurance". The difference is between paying a higher premium or a higher excess. Premium fees are the, usually daily, amount of money that you pay in order to lower your excess. Excess is the amount you have to pay in the event of an accident. So really the "insurance" option should be called the "high premium" option. Calling it the "insurance" option leads people to belive that they are driving around completely uninsured. Obviously this is something that you do not want to do and something the rental car company does not want you to do.

Anway, to better explain why I think the "insurance" option is not worth while (for me at least) some numbers are in order (current for Nov 2008, Avis Australia). All dollar values are in Australian Dollars:

The "insurance" option
$35/day
Excess $300

The "no insurance" option
$0/day
Excess $2,500

In the event of an accident you have to pay the full excess amount no questions asked. However, a refund will be repaid if the repairs end up costing less than the excess. No portion of the premium amount is refunded under any circumstance! Now with this in mind lets explore the difference between the "insurance" option and the "no insurance" option in the event of a minor accident.

Scenario One - Minor Accident (14 day rental)
In this scenario we have a broken side mirror that will cost $500 dollars to repair.

"Insurance" Case
14 days x $35 = $490
Excess = $300
Total "insurance" paid = $790
Repair Cost = $500
Refund = $0
Out of pocket amount = Total "insurance" paid - Refund ($790)

"No Insurance" Case
(Once again please note that even though I'm calling it the "no insurance" option your are insured - with Avis Australia at least)
14 days x $0 = $0
Excess Paid = $2,500
Repair Cost = $500
Refund = $2,000
Out of pocket amount = Total "insurance" paid - Refund ($500)

In this scenario you can see that with accidents that cause less than $790 worth of damage you are better off with the "no insurance" option.

Scenario Two - Major Accident (14 day rental)
In this scenario we have a multiple car accident.

"Insurance" Case
14 days x $35 = $490
Excess = $300
Total "insurance" paid = $790
Repair Cost = 1 metric gazillion dollars
Refund = $0
Out of pocket amount = Total "insurance" paid - Refund ($790)

"No Insurance" Case
14 days x $0 = $0
Excess Paid = $2,500
Repair Cost = 1 metric gazillion dollars
Refund = $0
Out of pocket amount = Total "insurance" paid - Refund ($2,500)

In this scenario it is easy to see that accidents with dmage amounting to more than $790 the "insured" option is best.

However

Whilst I do not know if we will get any refund for our little car park accident I do know that this is the first time in years upon years of renting cars that I have ever had to claim for any kind of damage to a vehicle. I would estimate that at $35 a day and $300 excess I would have to have a fairly substantial accident every 8 weeks or so to make the "insured" option a good one. Remembering that all cars are in fact insured (with Avis at least ;)