Does my car insurance cover a rental car?

Whether you rent a car frequently or occasionally it’s important to understand how your car insurance policy applies to a borrowed vehicle and the risks you face if you choose not to purchase additional coverage.

The rental car market has continued to suffer supply shortages since the start of COVID-19 production delays, causing higher demand, and as a result, higher price points. However, if you’re able to get your hands on a rental, check with your car insurance provider to see if you require coverage offered by a rental company. Securing adequate coverage should be your number one priority when driving a vehicle other than your own.

Does my personal auto insurance policy cover me when driving a rental vehicle?

Most people believe their existing car insurance policy will transfer over to any car they rent. This is only partially true, however, and could result in a coverage gap if you don’t check before you go.

Contrary to common belief, car insurance does not follow the driver; instead, it follows the car. That means you are not automatically covered in any car you drive, including a rental car. With the addition of rental car coverage on your policy, however, you can extend the coverage on your personal policy to any car that you choose to rent. This means that the same limits of your policy will apply to the rental car, including comprehensive and collision coverage.

Many car insurance professionals advise that you add optional rental car coverage to your personal insurance policy. An insurance endorsement known as “Liability for Damage to Non-Owned Automobiles” ensures you’re covered for any damage caused to a vehicle you drive as a guest. If you haven’t elected to add this coverage to your policy, you could end up having little to no coverage at all. If you rent cars frequently, be sure to ask for this coverage when shopping around for car insurance.

When to buy insurance from the rental car company

Most car rental companies will try to sell you their coverage for the rental car. This is usually a per-day rate and provides you with coverage for any damage to the vehicle that might occur while you are in possession of the rental.

The coverage offered by rental car companies is a good idea for anyone who does not have a vehicle of their own (and therefore no auto insurance policy), or for anyone who doesn’t have rental car coverage on their own personal auto insurance policy. But even if you do have rental car coverage, you might want to consider the extra coverage from the rental company, anyway, since it’s possible the rental car company could require you to pay for damages up front and leave you to seek reimbursement from your own insurance company. That would mean a large out-of-pocket expense if there is any serious damage, or if the car is stolen and you are responsible for replacing it.

It’s up to each driver whether they are willing to rely on their own insurance policy or choose to spend extra money on additional coverage from the rental company. For many people, the insurance on their own policy is enough to provide peace of mind that even if there is some initial up-front cost, they will not be left holding the bag if something goes wrong in a rental car.

Conditions of rental car insurance coverage

When you use your own insurance to cover you when driving a rental car, you will need to stick to a few rules to ensure the coverage applies. Only drivers who are named on your policy will be covered while driving the rental car, so don’t let anyone else get behind the wheel of your rental. Most car insurance companies have limits on who can drive as well; usually the named renter and that person’s spouse are permitted to drive, unless you name another driver on the rental contract. But again, unless that person is named on your policy, they will need to obtain their own coverage while driving the rental.

If you’re not in your home province when you need to rent a car, it’s important to follow the local laws, rules of the road, and driving restrictions. Your insurance could refuse you coverage if you are found in violation of certain laws, especially graduated licensing restrictions.

Whether you choose to use your own insurance or purchase insurance from the rental car company depends not only on your risk tolerance level but also on how often you rent a car. Those who rent only occasionally may choose to simply purchase the rental car company’s coverage rather than add Liability for Damage to Non-owned Automobiles coverage to their policy. If you rent frequently, however, the cost of adding the coverage to your policy is likely to be far cheaper than the cost of buying coverage every time.

Whatever option you choose, make sure you know you are covered and what the procedure will be for dealing with claims before you sign anything with a rental company. That way, in the unlikely event that something goes wrong, you will be prepared to deal with it, and won’t be caught off guard.

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