RAC Insurance polled drivers who have hired a car abroad and found three in 10 (30 per cent) described excess insurance sold at the rental desk as “very expensive” while 40 per cent said the policies were “expensive”.

The excess on hire cars is a lot higher than on normal car insurance policies – normally between £500 and £2,000. Excess insurance can reduce this liability to zero. Drivers are often obliged to pre-authorise the excess amount on their credit card before they hire the car.

Nearly half (47 per cent) of those surveyed by the RAC said they take out the hire car company’s additional car hire excess insurance policy to cover the excess.

One in five (17 per cent) drivers don’t take out excess insurance, while almost a quarter (24 per cent) purchase a specialist car hire excess insurance policy sold in the UK.

Of those who opt not to take out any form of excess insurance, 23 per cent claim to be worried about the consequences of having to pay the large amount of money pre-authorised on their credit card whereas 14 per cent claim they are “relaxed” about it.

Worryingly, 57 per cent say they are not particularly bothered by it – perhaps not realising they could be considerably out of pocket if the hire car is damaged in some way.

Less than a third (29 per cent) of those questioned were aware they could take out a cheaper car hire excess insurance policy in the UK.

Marcus Latchford, RAC head of insurance, said: “Hiring a car abroad comes with many challenges. Finding the right car at the best price is clearly the first and foremost issue, but then there’s the far less visible insurance costs to contend with when you arrive.

“While rental agreements in Europe generally include collision damage waiver, theft and third-party liability insurance, customers also have to decide whether or not to protect themselves against the large damage excess amount that is temporarily held on their credit card while the car is on hire.

“Taking out the rental company’s excess insurance policy is usually very costly which leads to many travellers just taking the chance that nothing bad will happen to their hire vehicle and the excess will not be charged to their card.”

RAC car hire excess insurance costs from £2.99 a day or £42.99 for an annual policy. It says rental companies charge £9 a day on average for the same cover.

Buying separate excess insurance is one of several ways drivers can reduce their car hire bill.