Is car rental insurance mandatory?
Do you plan to rent a car this summer? Read the fine print.
That includes both your own auto insurance policy and that of the rental car company.
Whether you need the vehicle because of holiday plans or wheels because your own car is awaiting repairs, you need to be sure of what your are covered for.
When you rent a car, you take responsibility for the vehicle and anything that happens to it. If you don’t have adequate coverage, you could be on the hook for damage to others’ property if you are at-fault for the accident. In addition, you may face charges from the rental car company for lost time since they are unable to rent the vehicle while it’s being repaired.
If you don’t know where you stand, the first step is to reach out to your insurance broker to find out what your policy covers and any limits.
The basics of rental car coverage
In Ontario, most insurers offer you optional coverage for liability for damage to vehicles you don’t own. This is an add-on or endorsement known as OPCF 27.
If you have OPCF 27 on your personal auto policy, you are covered for rental cars. But keep in mind the rental agreement must be in your name if you are the insured person on the auto policy. And it only applies in Canada and the U.S. Anytime you cross a border, you should reach out to your insurance broker and ask what's covered and what's not. Remember that each state or province has its own laws regarding insurance liability limits and traffic laws.
If you don’t have this endorsement, the annual cost of adding it to your policy is reasonable - less than purchasing a collision damage waiver from a rental company.
TIP: Don’t confuse the OPCF 27 (damage to vehicles you don’t own) with the OPCF 20 (Loss of Use endorsement), which provides a rental car if your vehicle is in the shop for repairs as a result of collision or vandalism.
Credit card and travel insurance coverage
Your credit card may provide free collision damage on vehicles that you rent. To be eligible, you need to charge the rental on that credit card and decline the collision damage waiver from the rental company. Be sure of what limitations exist on travel as well as any restrictions on drivers.
Rental car insurance may be an optional add-on to your travel insurance policy. This will usually cover your rental vehicle against any loss or damage. In some cases, it will also cover costs such as towing, salvage, fire department charges, and reasonable loss of use. Know the terms of your policy.
Car rental insurance options
While insurance policies with rental car companies can be expensive, getting collision insurance directly from the company itself helps avoid surprise out-of-pocket charges. Be sure to complete a thorough pre-trip inspection with the rental agent to document any existing damage before you leave the parking lot.
Policies offered typically include:
1. Collision Damage Waiver This waives all financial responsibility in the event of a rental car being damaged or stolen while in your care. With this coverage you won’t pay a deductible, towing, loss-of-use and administrative fees should the car need repairs. This coverage may have exclusions, such as not being covered while driving on unpaved roads.
2. Personal Accident Insurance Provides accidental death and dismemberment coverage to the driver and any passengers in the car at the time of the accident. Agencies each have a different benefits package. Typically, the driver is covered up to $100,000 and passengers may receive up to $10,000.
3. Personal Effects Coverage Personal effects coverage pays for your personal property if it’s lost, damaged, or stolen while travelling with your rental vehicle. It’s usually bundled as an extra feature of Personal Accident Insurance and isn’t something you pay for separately. However, there is a limit, and will often require a deductible paid before a claim is paid out.
4. Liability Coverage Liability covers you for damage and injury you may inflict on other people and their property while driving a rental car. By law, a minimum level of third-party liability comes with all rental cars in Canada. 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 is already factored into your rental and does not require an additional fee. You may be offered Supplemental Liability Insurance, which is coverage above and beyond the minimum amount rental companies are required to provide.
A word about deductibles
Drivers involved in at-fault collisions while using rental cars are often surprised when the insurer covering their rental tells them they have to pay a deductible. The contractual terms agreed upon between the rental company and the person renting the vehicle can be much different than their primary insurer.
If they were not at fault for the accident and are not told they have to pay a deductible, the rental has been paid for by their primary insurer.
Ultimately, if you’re not sure what coverage your personal auto policy provides ask your broker. When it comes to the coverage the rental company is offering, ask about the fine print.
With files by Canadian Underwriter