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The Ins and Outs of Rental Car Insurance

February 21, 2014

rental car signIt’s March Break and you and your family are thinking of piling into a rental car and heading south to snatch some sunrays. Or maybe renting a car and heading north to the cottage is more your scene. Either way, as enticing as the adventure can be, there’s one factor you don’t want to skimp out on – insurance for your rental car.

Your home or tenant insurance will cover your property in the car like your luggage and other possessions but the car itself is a different story.

A common misconception is that auto insurance policies are transferrable from personal vehicles to rentals and what’s not covered can be covered by built-in insurance on your credit card. It’s a bit more complicated than that.

Will My Auto Policy Cover a Rental Car?

“Let’s say you’re going to somewhere warm and sunny like Florida and you want to rent a vehicle there, your auto insurance policy won’t cover your rental vehicle,” says Peter Karageorgos, Manager of Consumer and Industry Relations for the Insurance Bureau of Canada.

The rental car provider will have coverage on the vehicle for liability but 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 insurance representative. They will help you purchase the correct coverage. What you will be purchasing is an endorsement which is additional coverage that extends your policy to include the rental.

“So if your wife and kids are included on the regular auto policy, they’re included on the rental policy,” Karageorgos adds.

To go this route you’ll need to request an Ontario Endorsement Form 27 (OEF 27) or (SEF 27 in other provinces) from your insurance company before you take off.

The charge for this coverage varies by insurance company. It is typically $40-$50 per year.

If you purchase “collision damage waiver” from the rental car provider you could be looking at an additional cost of upwards of $20 per day so adding it to you existing policy for the year may make sense. 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.

Currency conversion should be taken into consideration in the event of an accident, as your deductible will be in Canadian dollars.

If you’re a frequent traveller, you might want to shop your car insurance to find a policy with lower rates when it comes to endorsement.

Will My Credit Card Cover Rental Car Insurance?

Some credit cards will offer car rental insurance via the cards themselves if used to pay for the car rental.

“They do have coverage but at the end of the day you need to be fully aware of whether or not it impacts your own auto insurance policy,” says Karageorgos.

For instance, some cards won’t insure certain vehicles like trucks and mobile homes. In other cases, your insurance may be void if you travel on unpaved roads.

One more thing to consider when renting a vehicle, whether you use your own insurance policy or coverage from a rental provider, make sure that the value of the vehicle you rent does not exceed the maximum amount that your credit card or auto insurance policy will pay.

The moral – your personal auto insurance or credit card may not automatically cover you for all rentals and situations so read the fine print, do your homework before venturing out, so you can avoid any hiccups and have a worry-free escape.