How to deal with insurance excess when renting a car abroad?

If, by any chance, you are using an American credit card, auto insurance coverage is built in, for most cards. This benefit is offered by the company (Visa/Mastercard/etc.) and not the bank - so it will be prudent to check if this is offered in other countries too.

I was travelling in New Zealand, and we met with an accident (my fault). The insurance company did collect the excess on the spot (we didn't have the waiver). Upon our return, I filed a claim - it took a ton of paperwork over numerous calls to New Zealand (for police reports, rental agreements, damage estimates, repair bills, etc.), but we finally got reimbursed. I was told that the insurance not only covers the excess and/or repair bills, but up to the complete replacement cost of the vehicle.

Most car rental companies offer a 'waiver fee' which essentially reduces your excess to zero. In North America it's called Collision Damage Waiver (CDW). It's going to cost you, and in the long run may not be worth it, but you should be able to get it. The exception will be if you are a young or inexperienced driver.

I think it very much depends on the country where you are renting the car from. In Europe the rental agency will always inform you what the excess is while picking up the car and they will give you the quote for the additional insurance. Certain online websites, e.g http://www.auto-europe.co.uk/ let you search for cars without excess, have their own excess protection plan, etc.

I am not aware how it works on other continents.