Do I need rental car insurance?

If you’re renting a car in Canada, then you might be wondering if rental car insurance is necessary. Unlike car insurance in Toronto, which most drivers know is mandatory, there is much confusion about whether rental car insurance is needed, and if so, how to buy it. Keep reading to learn more about rental car insurance in Canada, like what it covers, where you can buy it from, and whether you need it to rent a car.

Rental car insurance explained

First, let’s try to understand what rental car insurance is. Rental car insurance is a form of coverage that protects you when driving a car from a rental car company. Rental car insurance is typically offered by three types of companies: rental car agencies directly, insurance companies, and credit card companies. Depending on where you purchase rental car coverage from, the type of coverage will vary. That said, rental car insurance is generally designed to offer protection against damage, theft, and liability claims.

Is rental car insurance mandatory in Canada?

Now that you know what rental car insurance is, let’s dive into the question of the hour: do you need it? There are two ways to answer this question:

The first involves the legality of rental car insurance. Is rental car insurance a legal requirement in Canada? No, it is not. Unlike personal car insurance which is mandatory for all drivers, rental car insurance is not government-mandated. This means that you are under no obligation to purchase rental car insurance from a rental car company, insurance company, or any other company.

The second way of answering this question is less about the legality and more about the benefits that rental car insurance offers. So while drivers in Canada are not legally required to buy rental car insurance coverage, it is generally recommended due to the protection it offers. Otherwise, you will have no way of financially protecting yourself if something goes wrong while driving a rental car.

As a result, if you got into a collision or the rental car was stolen, you would be on the hook for paying for the damages. This could amount to tens of thousands of dollars or more. That is why most drivers choose to purchase some form of rental car insurance. The reality is that the cost of rental car insurance is less than the cost of paying for a minor car accident out of pocket. Thus, it makes financial sense to do so.

For help deciding whether rental car insurance is right for you or to learn more about the benefits that come with purchasing this type of coverage, contact BrokerLink.

What to consider before buying rental car insurance

Before purchasing rental car insurance, there are a few key factors to consider. We outline a list of questions to ask yourself that can help you decide if rental car insurance is for you, and if so, where you should buy it from:

What coverage is included with the insurance from the rental car agency?

Find out what coverage is included with the rental car insurance offered by the rental car agency. Some coverage may be automatically included while others need to be purchased. Generally speaking, the only type influenced by your rental is third party liability coverage, as this is a legal requirement in all Canadian provinces and territories.

Contact the rental agency and ask them directly about what types of coverage are included in the rental contract, as well as the terms and conditions of the coverage, such as the coverage limit.

Am I already covered for a rental car by a different insurance policy?

You might be surprised to learn that you have another insurance policy that covers you when driving a rental car. For example, if you have a personal auto insurance policy, it might cover you.

Alternatively, if you have travel insurance, rental car coverage may be included with that. Some health insurance policies even feature rental car coverage. Do some digging and review the terms and conditions of your existing insurance policies to find out if you are already covered for rental car use.

Does my credit card cover me for a rental car?

The third and final question to consider before purchasing a rental car insurance policy is: Does my credit card cover me for a rental car? You might be surprised to learn that many credit card companies offer perks to cardholders that may include rental car insurance. If you have any sort of travel credit card, chances are it comes with some form of rental car coverage. Give your credit card company a call to find out if your credit card covers you.

Where to get rental car coverage

As mentioned above, there are several ways that you can obtain rental car coverage. In fact, you might already have it and not even know it. Below, we outline the different ways or places that you can get covered for a rental car:

1. Your personal auto insurance policy

The first place that you can get rental car insurance is from your personal car insurance provider. Many insurance policies feature this coverage, so if you’re wondering Am I covered by my policy for my rental car? you should contact your insurance company directly. Many insurance companies in Ontario give policyholders the option of adding coverage for damage to cars that they do not own.

It is an endorsement that can be added to personal auto insurance policies and is known as legal liability for damage to non-owned automobiles or OPCF 27. When you call your insurer, ask them if your policy currently features OPCF 27. If it does, then you will likely be covered against damage to a rental car. Please note that as with all types of insurance coverage, OPCF 27 endorsements have their limits. One of the main limits is that it only applies to cars driven in Canada and the United States, so if you are planning to drive a rental car somewhere outside of the U.S. or Canada, then this coverage will not apply.

If you ask your provider about OPCF 27 coverage and they inform you that it is not currently part of your policy, you may be able to add it. Contact BrokerLink to find out more about how you can add this endorsement to your personal auto insurance policy and how doing so can affect your premium.

2. Your credit card company

Your credit card company is another place where you may be able to get rental car insurance. Again, you might already have coverage and not realize it. Credit cards from a variety of companies and financial institutions come with all kinds of perks, rental car insurance often being one of them. This is especially likely if you have a travel credit card. Typically, credit card companies provide rental car insurance that features collision coverage, since third party liability coverage is usually automatically provided by the rental car company given that it is mandatory in Canada.

Contact your credit card company to find out if you have coverage, as well as the type of coverage you have and its limits. You can also take this opportunity to ask additional questions like which insurance company they offer coverage through and how the claims process works in the event that you need to file a claim. It’s also a smart idea to confirm the terms that must be met for you to be eligible for the coverage. For instance, most credit card companies require that the full amount of the rental be charged to the credit card and that you decline the collision damage waiver offered by the rental car agency at the time of pick-up.

3. Your travel insurance policy

A third place that you can get rental car insurance is via your travel insurance policy. If you have travel insurance or intend to purchase it for your upcoming trip, you should carefully review the terms and conditions of the contract to find out if it includes rental car coverage. Keep in mind that there are many different types of travel insurance policies, from trip cancellation insurance to travel health insurance, and not all policies will come with rental car coverage.

That said, even if the policy you choose does not automatically come with rental car coverage, you might be able to purchase it as an add-on. Rental car insurance add-ons for travel insurance may cover you against loss or damage to the vehicle, as well as extra costs like insurance cover for towing or fire department charges. Contact your travel insurance provider or have a licensed insurance advisor at BrokerLink review your policy to let you know if and how you are covered for rental car use.

4. The rental car agency

Finally, one last place where you can get rental car insurance is directly from the rental car agency. While most rental car agencies automatically include the minimum amount of third party liability coverage with all rentals, anything above and beyond this will cost extra. The exact coverage offered by rental car companies differs but may include a collision damage waiver, theft protection, roadside assistance coverage, and more. Do your due diligence by shopping around and comparing rates before purchasing coverage directly from your rental car company.

Rental car insurance coverage

Now you know where you can get rental car coverage, but what exactly does rental car insurance cover? That’s the topic we cover next. Again, policies vary between providers. However, generally speaking, rental car insurance includes the following coverages:

Collision damage waiver

Most rental car insurance policies include what is known as a collision damage waiver or a loss damage waiver. This waiver covers the vehicle you are renting from damage. Specifically, it will cover you if the car is damaged due to a fire, theft, or collision. Think of a collision damage waiver as a combination of collision coverage and comprehensive coverage in car insurance. Due to the broad protection that collision damage waivers offer, they do not come cheap.

In fact, they are typically the most expensive form of rental car insurance out there. They can cost policyholders up to $30 a day or more, on top of regular rental car fees. That said, the protection they offer is second to none. Keep in mind that even collision damage waivers have their limits, so you should find out exactly what is and is not covered by yours. For instance, some rental car companies have started charging extra if you want your collision damage waiver to cover towing, lost revenue while the car is being repaired, administrative fees for dealing with the vehicle repair, depreciation on the resale value of the vehicle, and more.

Further, some collision damage waivers stipulate that coverage only applies when driving on paved roads, so if you plan to do any off-roading, you may need to purchase extra protection.

Liability insurance

Liability insurance is another common type of rental car coverage. Why? Due to the protection it provides but also due to the fact that it is a legal requirement for all drivers in Canada. Liability insurance is designed to cover drivers of rental cars if they cause collisions that result in bodily injury or property damage to another person. Rental car companies that offer this type of insurance usually only offer the government-mandated minimum, which may be as low as $200,000.

Given how expense liability claims can be, it is recommended that drivers purchase additional liability insurance, ideally with a limit closer to $1,000,000 or $2,000,000. This way, you will be covered if you get into either a minor or major car accident. Liability coverage with a limit of just $200,000 is not likely to be sufficient if you get into a major accident. This type of insurance coverage can pay for a range of costs associated with an at-fault accident, such as medical expenses, legal fees, repair bills, and more.

If you find yourself in an accident, you should know how to report a car accident. It’s also important to remember that calling your insurance company after a minor car accident is just as important as doing so after a major accident.

Personal accident insurance / personal effects coverage (PAI - PEC)

Next, personal accident insurance / personal effects coverage are two other types of popular rental car insurance. The former, personal accident insurance or PAI, is a type of insurance that covers the costs associated with accidental death and dismemberment, accidental medical expenses, and ambulance fees. While terms vary between providers, most PAI policies cover both the driver of the rental car and the driver’s passengers. However, the driver is usually covered up to a higher amount than the passengers.

It’s important to remember that even if your rental car insurance policy has liability coverage, that only covers you for medical costs associated with the other injured party, not yourself. Thus, if you want your medical expenses covered in the event that you or someone in your rental vehicle is injured or dies in a collision, you will need to purchase PAI. Think of it like the accident benefits coverage equivalent for rental cars.

Meanwhile, personal effects coverage (PEC) covers the personal belongings in your rental car if they are lost, damaged, or stolen. Typically, PEC is added to PAI coverage, meaning you won’t have to purchase it separately. Make sure that you review the limits of PEC, as coverage limits are usually quite low and include a deductible. The number of passengers who are entitled to file a PEC claim is also restricted. Find out more about auto insurance claims, like can you cancel a car insurance claim and how many car insurance claims per year by contacting BrokerLink.

How much does rental car insurance cost?

The cost of rental car insurance varies between providers. It depends on whether you purchase it directly from the rental car agency or from an insurance provider or credit card company. When buying rental car insurance directly from a rental car company, it can cost up to $65 per day on top of other rental car fees.

However, the total amount you will pay for rental car coverage depends on the duration of the rental agreement, the type of car you rent, the number of people insured to drive the vehicle, the coverage limits you choose, and other factors, like your age, claims history, driving record, gender, and more. Contact BrokerLink to receive a free rental car insurance quote today or learn 5 ways to save on car insurance.

Contact BrokerLink to find rental car insurance coverage today

If you have an upcoming trip and are planning on renting a car, get in touch with BrokerLink to learn more about rental car insurance coverage. One of our auto insurance specialists would be pleased to explain how rental car coverage works, what risks it protects you against, how much it costs to add to your policy, and where you can purchase it from.

A licensed insurance advisor can also review the terms of your existing auto insurance policy or travel insurance policy to help you identify whether you are already covered for rental car use. If you aren’t and you want to purchase this coverage separately or add it to an existing policy, we can provide you with a free estimate as to how much that will cost.

BrokerLink is pleased to offer free rental car insurance quotes to all customers. These quotes are accurate, reliable, and 100% obligation-free. Give us a call, visit us in person, or use the online quote tool on our website to request your free rental car insurance quote today. You can also reach out to us if you have other questions or needs, such as how to calculate mileage or how low mileage car insurance works.

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FAQs on rental car insurance in Canada

Am I required to buy rental car insurance?

No. Rental car insurance is not a legal requirement in Canada. Most car insurance policies will extend to rental cars. However, it is smart to protect yourself by purchasing it when renting a car.

Should I purchase a collision damage waiver for my rental car?

Yes. Experts generally recommend adding a collision damage waiver to your rental car insurance policy, as it offers broad protection against everything from theft and physical damage to liability claims.

Can I rent a car without purchasing rental car insurance in Canada?

Yes. All rental car agreements come with basic protection in the form of liability insurance, since it is a legal requirement in Canada. You are not obligated to purchase any rental car insurance beyond this. That said, the insurance that comes with your rental car is usually extremely limited, which means you may have to pay a lot of money out of pocket if you decline additional coverage. If you choose not to purchase rental car insurance, make sure that you follow these safe driving tips to reduce the odds of an accident.

Can I rent a car without purchasing rental car insurance in Canada?

Yes. All rental car agreements come with basic protection in the form of liability insurance, since it is a legal requirement in Canada. You are not obligated to purchase any rental car insurance beyond this. That said, the insurance that comes with your rental car is usually extremely limited, which means you may have to pay a lot of money out of pocket if you decline additional coverage. If you choose not to purchase rental car insurance, make sure that you follow these safe driving tips to reduce the odds of an accident.

If you have any questions, contact one of our local branches.