Car rental insurance is not something you spend too much time thinking about until one day, you are at a rental office being told that it is critical to have it and you’re stuck thinking “Do I need to purchase rental car insurance?” But what type of insurance coverage do rental companies offer? Wouldn’t your credit card or personal insurance policy already offer you coverage? Let’s look at what type of coverage you need when renting a car and explore the different types coverage you may already have at your disposal.

Is rental car insurance mandatory?

Canadian drivers are not required to purchase additional insurance from the rental car company when renting a car. However, you do need to have ample insurance that will cover you in case of an accident. In all parts of Canada, third-party liability coverage is required to operate a vehicle. Because of this, the legal minimum is often included with your rental car, but always double check to be sure.

Rental car insurance basics

The surprising truth is that in many (if not most) cases, you likely already have rental car insurance through one or more of these options:

1. Your personal car insurance

Most Ontario auto insurance companies offer you the option of additional coverage for liability for damage to automobiles that you don’t own. The coverage comes in the form of an “add-on” or endorsement known as “Legal Liability for Damage to Non-Owned Automobiles.”  It is also referred to as an “OPCF 27”.

If your auto insurance policy includes the OPCF 27, you already have coverage for damage to a vehicle that you don’t own, such as a rental automobile. It is only valid for driving in Canada and the United States.

If your auto insurance policy does not include the OPCF 27, you may want to consider adding it. The yearly cost of adding it to your policy is usually quite reasonable. This is an economical alternative to purchasing a collision damage waiver offered by an auto rental company if you and your family routinely rent cars on holidays.

* Important note: The car rental agreement must be in your name, if you are the insured person named on the auto policy.  Also, be aware not to confuse the OPCF 27 with the OPCF 20 (loss of use endorsement). The OPCF 20 will provide a rental car if yours is in the shop for repairs as a result of collision or vandalism.

To be certain, you should read your insurance policy in detail or call your isure broker and ask any questions you may have. We’ll be happy to help you figure out what you are (and aren’t) covered for when renting vehicles in order to help you avoid car rental insurance, if possible.

2. Complimentary coverage that comes with your credit card

Your credit card may already provide collision damage on vehicles that you rent. To be eligible for this coverage, you will likely need to charge the full amount of the rental on your credit card AND decline the collision damage waiver offered by the car rental company.

According to creditcardgenius.ca, no credit card offers liability insurance for rental cars. Also, travel insurance through a credit card is going to have an upper limit, so be careful to check what those limits are.

A minimum level of third-party liability also comes with all rental cars in Canada, by law. The minimum amount starts at $200,000 and may be up to $1,000,000, depending on the province and/or car rental company. This minimum coverage is already factored into your car rental and does not require an additional fee.

Remember, you may already be covered through your credit card. If you are, you could save up to $20 or $30 per day on your car rental!

3. Coverage included with your travel insurance

There are different types of travel insurance that you may consider:

  • Trip cancellation or travel disruption insurance
  • Travel health insurance and/or
  • Medical evacuation insurance

These will cover different situations and may give you financial peace of mind, as well as allow for safe and healthy travel. Rental car insurance may be optionally included as an add-on to the policy, which will usually cover your rental vehicle against loss or damage. Sometimes it will also cover costs such as towing, salvage, fire department charges and reasonable loss of use.

Of course, to be absolutely certain of what is covered, you should read your travel insurance package thoroughly or call your provider if you’re not sure whether you’re covered or not. If you’re not adequately covered, you should consider buying additional insurance from the rental company.

Car rental insurance options

When speaking with the customer service representative at the rental office, you will likely be told about four options for car rental insurance. Each type of coverage is there to protect you in different ways:

1. Loss Damage Waiver (LDW) / Collision Damage Waiver (CDW)              

This waiver covers the car you’re renting itself and nothing else. Having this coverage means that if anything happens to the car (such as fire, theft or accident,) the costs will be paid for. This is similar to comprehensive and collision insurance in regular auto policies, but for rental vehicles.

Rental car companies have now started charging additional fees for:

  • Lost revenue while the car is being repaired
  • Administrative fees for handling the repair
  • Towing costs
  • Depreciation on the resale value of the vehicle for it having been in an accident

The expensive CDW & LDW policy offered by the rental car company covers these additional fees, but other coverage you have may not, so you may need to check.

Car rental insurance sold as Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW) does not come cheap. At up to $30 per day, you could easily be on the hook for approximately $500 for a two-week rental, which is often more expensive than the rental fee itself. You should also be aware that it often comes with exclusions. For example, it may provide no protection while you drive on unpaved roads. It’s important to note that the protection you get also varies from company to company.  Auto rental companies charge a daily rate on top of the rental charge for the CDW and though you can buy this directly from the auto rental company, you should be aware that there are alternatives.

2. Personal Accident Insurance (PAI)

Provides accidental death and dismemberment coverage to the driver and any passengers in the car at the time of the accident. Rental car agencies each have a different benefits package, but typically the driver is covered up to $100,000 and passengers may receive up to $10,000.

Even if you have liability insurance and you get in an accident, nobody is paying your medical bills or a lump sum payment if a death were to occur. That’s where PAI comes in. It covers medical costs for you, your passengers and sometimes, also includes lump sum accidental death and dismemberment (AD&D) payouts.

3. Personal Effects Coverage (PEC)

Personal effects coverage pays for your personal property if it’s lost, damaged or stolen while you’re travelling with your rental vehicle. It’s usually bundled as an extra feature of PAI and isn’t something you pay for separately.

However, there is a stated limit, and will often need a deductible paid before a claim is paid out. Typically, the coverage is $500 with a $25 deductible per person, but there are limits as to how many passengers can make a claim.

4. Liability Coverage (LI)

Liability insurance covers you for damage and injury you may inflict on other people and their property while driving a rental car. It is generally recommended that you increase your coverage to $1,000,000 or $2,000,000 because if you get into an accident and cause serious harm or death, the minimum coverage will likely be inadequate.

You may also encounter Supplemental Liability Insurance (SLI), which is coverage above and beyond the minimum amount rental companies are required to provide. Be sure to ask what those minimums are because chances are you don’t need anything supplemental.

In short, rental car insurance coverage is available to protect passengers, the vehicle, personal belongings and you. It will also cover damages from another person’s property, vehicle or injuries.

Can I avoid rental car insurance?

There are some situations where you should consider buying rental car insurance, even if you’d like to avoid it:

1.   You don’t have car insurance and your credit card doesn’t provide coverage 

Without your own auto insurance policy that includes collision and comprehensive coverage (or at least a credit card that provides CDW and LDW coverage,) there is too much financial risk should you get into an accident.

2.   Your auto insurance policy doesn’t have the right endorsement

In order to be covered for liability and personal accident insurance, your Ontario auto insurance policy needs the OPCF 27 (liability for non-owned automobiles) endorsement to be transferable to a rental car.

3.   You are a high-risk driver and it’s not worth another claim

Already paying a lot for car insurance due to accidents and tickets? It’s not worth the risk of another claim with your insurer. However, know that your insurance company will find out about the collision as it shows up on your motor vehicle record.

4.   Travelling for business

Do not assume your personal policy has you covered if you’re away on official business. Your employer is paying for the rental car, therefore they should pay for the insurance, too.

5.   Renting sports cars, trucks, luxury or specialized vehicles

These are expensive cars and have a higher replacement value than your own. If you want to pay for fancy, best to pay for the fancy insurance as well.

6.   Your own policy only covers the minimum

Collision and comprehensive, which covers CDW and LDW, are optional on your auto insurance policy. So, if you don’t have them and your credit card doesn’t cover these, buy the insurance. Also, the minimum third-party liability is $200,000, which we recommend upgrading to at least $1,000,000.

7.   International travel (outside North America)

Your own policy may not cover you beyond North America’s borders. Either call your provider to find out or pay for the insurance at the counter.

How to save money on a car rental

Rental insurance can be quite costly. To prevent yourself from duplicate charges, here are some tips to help save money or even avoid rental car insurance all together:

  • Do your homework: Shop and browse different agencies and websites to compare prices.
  • Benefits of being loyal: Many rental car agencies have loyalty programs that allow you to earn points and redeem them.
  • Savvy shopper: Check for coupons, discounts or free days at local rental companies.
  • Plan ahead: Avoid booking your rental last minute at the airport because you will pay a premium and have less selection.
  • Cheap & cheerful: Economy cars will be the more affordable option for your trip.

FAQ’s

How much does rental car insurance cost?

It varies. What you’re charged for insurance-wise depends on where you are, who you are and what kind of vehicle you’re renting. Car rental prices will be lower for budget cars, and higher for luxury rentals. On average, it will cost $65 a day. However, this would depend on how much protection you add and where you obtain it.

Is it necessary to buy insurance while renting a vehicle?

You need some form of coverage when you rent a car. Without it, you would have to pay out-of-pocket for any damages. Even a minor accident could cost thousands of dollars in damage.

Should I get collision coverage on my rental?

It is a good idea to purchase collision coverage from the rental company if you don’t have your own personal policy. If you have collision on your personal policy, it may help pay to repair the rental car if it’s damaged in a collision. However, keep in mind that a deductible will apply.

Can I rent a vehicle without insurance?

Yes. Rental cars automatically come with basic protection, however, the basic amount is minimal. Any damage above these limits means you would have to pay out-of-pocket.

Can I add a driver to my rental car agreement?

Yes. Both the renter and the new driver must be present at the rental location with their valid driver’s license and credit card.

What insurance should you get when renting a car?

Most car rental companies will include some sort of basic insurance within the Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW). This basic insurance is limited and can still put you at risk of huge out-of-pocket expenses in case something goes wrong with your rental.

What happens if you damage a rental car without insurance?

If the accident was your fault, you’re responsible for damage to the rental car and for any liability issues. If you are not at-fault, your rental company will work directly with the other driver’s insurance company.

Do you get your money back after renting a car?

Once you return the vehicle, the branch will refund your security deposit in-full unless there are additional unplanned charges, such as fuel replacement, vehicle damage or a late return. The time it takes to receive your refund is based on the method of payment used to pay for your rental.

Driving in Ontario can be expensive. Choosing to rent a vehicle may mean hidden costs, including paying extra for coverage that you may already have. Ultimately, you want to have affordable car insurance when you rent a car while getting all the protection you need. Avoid car rental insurance costs by doing your homework and by reading your personal car insurance policy thoroughly for coverage. Discuss car rental options when purchasing travel insurance because with a little preparation and research, you can save yourself a bundle by being able to safely decline insurance you don’t need.

Be sure to talk to your isure broker to understand what level of coverage you have before you visit a rental car agency so that you don’t feel pressure to buy unnecessary coverage!

Does my rental insurance cover accidents that involve cyclists?

Odds are that the answer is “Yes!” Most car insurance policies cover such losses as injuries, medical expenses, lost wages and suffering caused by accidents involving a car and a bicyclist. You must have Personal Injury Protection coverage on your auto policy – be sure to discuss this with your isure broker!

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