The Ins and Outs of Car Rental Insurance
Are you planning on renting a car for a road trip to head up north to the cottage for a few days? Have you given thought to the auto insurance coverage you will need for that rental car?
Your home or tenant insurance will cover property in the car, such as your luggage and other possessions. However, the car itself is a different story. And purchasing a car rental company’s insurance policy can be expensive.
Vehicle rental companies typically offer four types of auto insurance:
- A collision damage waiver (CDW) to protect you from paying for any damage to the rental car or if it is stolen, which may cost as much as $40 per day
- Supplemental liability insurance protects you and any other authorized driver against third-party injury, death, and property damage claims. It may cost up to $10 per day
- Personal accident insurance covers you and your passengers for any medical expenses resulting from a car accident, and may cost up to $9 per day
- Personal effects coverage pays for losses, theft, or damage to any personal items you have inside the rental car, and may cost up to $7 per day
Buying the rental company’s coverage can jack up the cost of your vehicle rental significantly.
A common misconception is that personal auto policies are transferable from personal vehicles to rentals, and what’s not covered can be covered by built-in insurance on your credit card. The reality is it’s a bit more complicated than that.
Will my auto policy cover a rental car?
The rental car provider will have coverage on the vehicle for liability, but it will not protect you if the vehicle is damaged while in your possession. Check your auto insurance policy to see if you have this coverage if you are not sure, or if you know that you do not have the coverage, talk to your broker.
You may need to buy an endorsement from your insurance company beforehand. In Ontario, this endorsement is known as Ontario Policy Change Form 27 (OPCF 27); in Alberta, it's known as Standard Endorsement Form 27 (SEF 27).
Check with your insurance professional regarding what the limit of coverage is for vehicles you drive that you do not own, including rental vehicles. The endorsement will feature a deductible, and the coverage includes all drivers listed on the policy, but it is only valid in Canada and the United States.
It’s also important to note that the damage to a rental vehicle under this endorsement is for the same coverage that you have on the vehicle on your policy. For example, if you do not have comprehensive coverage as part of your personal policy, you may not be covered for vandalism on a rental car.
Although the cost for this additional coverage varies by insurance company, it is typically $40 to $50 per year. After adding an endorsement to your policy, make sure that you have a copy of your auto policy with you as proof that you have the coverage, as some car rental providers may require it.
If you were to travel outside of Canada or the United States and wish to rent a vehicle at your destination, your personal auto policy won’t cover that rental vehicle. Also, currency conversion in the U.S. should be taken into consideration in the event of filing a claim due to a collision, as your deductible will be in Canadian dollars.
Will my credit card cover rental car insurance?
Some credit cards will offer car rental insurance if you use the card to pay for the car rental. But you need to be fully aware of whether it impacts your own auto insurance policy. For instance, some cards won’t insure certain vehicles like trucks and mobile homes.
In other cases, the credit card insurance policy may be void if you travel on unpaved roads. Credit card rental car insurance may exclude coverage for liability or personal injury to you or others. You may face additional fees from the rental provider for the loss of use of their vehicle that your credit card won’t cover. Err on the side of caution and contact your credit card issuer in advance to get the details on your coverage and its limitations.
When does buying insurance from a car rental company make sense?
There are instances when purchasing coverage from the rental provider makes sense even if it adds to the cost of your rental vehicle:
- If you don’t have a personal auto insurance policy
- If you do not have OPCF 27 or SEF 27 as an endorsement on your policy
- If you rent a vehicle outside of Canada or the United States
- If the value of the vehicle you rent exceeds the maximum amount of your endorsement limit
If you want to avoid paying the rental company’s higher costs for car insurance coverage, contact your broker or insurance provider and inquire about adding OPCF 27 (or SEF 27 if you are in Alberta) to your policy. As always, be sure to read the fine print, do your homework before venturing out, and enjoy a worry-free getaway.
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