Rental car insurance
Everything Canadians need to know about car rental insurance to help you make an informed and confident financial decision.
Matt Hands, Business Director, Insurance
Rental car insurance includes 4 options. They include:
- Loss damage waiver (LDW) / Collision damage waiver (CDW)
- Personal effects coverage (PEC)
- Personal accident insurance (PAI)
- Liability (LI)
Each type of coverage is there to protect you, your passengers, the rented vehicle, your personal belongings, and any injuries that may occur. It also covers damages to another person’s property or vehicle as a result of a collision.
Car rental agencies insure their fleets, so what they’re offering isn’t actually insurance, your money goes into an overall fund. So, If you do pay for the different coverage options, it means they can’t pursue you for any damages.
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Rental car insurance is offered to you at the counter when you pick up your vehicle. Unfortunately, it can create undo pressure on you to make a quick decision. It’s a good idea to know how you might be protected ahead of time. If you know the rules, you can make a smart, informed, and financially savvy decision.
Here is an overview of the available rental car insurance coverages:
Loss Damage Waiver & Collision Damage Waiver
Protects you from charges related to theft and collision of the rental car. On your insurance policy, it's called collision and comprehensive. CDW or LDW is not an insurance policy, by signing the agreement, you’re paying the car rental agency to waive its right to pursue you for damages or losses.
Cost: $9 to $30 per day
Required: Yes, but many credit cards insure the rental car for CDW and LDW. Read your card's fine print. Your auto insurance policy may also cover it.
Personal Accident Insurance or PAI
Provides accidental death and dismemberment coverage to the driver and any passengers in the car at the time of the accident. Rental car agencies each have a different benefits package, but typically the driver is covered up to $100,000 and passengers receive $10,000.
Cost: $7-$10 per day
Required: No, but you're leaving yourself exposed. Buy it if you don't have your own auto insurance policy with an endorsement to drive rental vehicles (OPCF27).
Liability Insurance or LI
Protects you from being held liable in a collision. If you are at fault in a collision and injure another person, or damage someone else's property like their vehicle, you will want to have liability insurance. Liability will cover the costs associated from the crash including the vehicle and medical benefits to anyone injured.
Cost: $15-$30 per day
Required: Yes, unless you have an auto insurance policy with $1-$2 million in liability and an OPCF27 endorsement porting that coverage onto your rental car.
Personal Effects Coverage or PEC
Sometimes called personal effects protection gives you peace of mind for your personal belongings and valuables. However, there is a stated limit and will often need a deductible paid before a claim is paid out. Typically, the coverage is $500 with a $25 deductible per person, but there are limits as to how many passengers can claim.
Cost: $2-$5 per day
Required: No, so long as you have home insurance. Otherwise, pay for it if you don't want the risk of losing something $500 or less.
Even though numerous financial experts advise against purchasing a rental agency’s insurance, there is no simple answer. You could have varying degrees of rental car insurance coverage from your personal car insurance policy, your travel credit card, your cashback credit card, and even your home or tenant’s insurance. It’s important to know what level of coverage you have before you visit a rental car agency.
You don't have car insurance and your credit card doesn't provide coverage
Without your own auto insurance policy that includes collision and comprehensive coverage, or at least credit card that provides CDW and LDW coverage, there is too much financial risk.
Your auto insurance policy doesn't have the right endorsement
In order to be covered for liability and personal accident insurance, your Ontario auto insurance policy needs the OPCF27 (liability for non-owned automobiles) endorsement to be transferable to a rental car. Look for similar coverages in your home province.
You are a high-risk driver and it is not worth another claim
If you are already paying a lot for car insurance due to accidents and tickets, it's likely not worth making yet another claim with your insurer. Buy the insurance to avoid making a claim with your insurer.
Travelling for business
Do not assume your personal policy has you covered if you're on official business. Your employer is paying for the rental car, they should pay for the insurance too.
Renting sports, luxury, or specialized vehicles
These are expensive cars and have a higher replacement value than your own. If you want to pay for fancy, best to pay the fancy insurance as well.
Your own policy only covers the minimum
Collision and comprehensive, which covers CDW and LDW, are optional on your auto insurance policy. The minimum liability is $200,000
International travel (outside North America)
Your own policy may not cover you beyond North America's borders. Either call your provider to find out, or pay for the insurance at the counter.
Are you getting the best rate for your car insurance?
While paying for rental car insurance may give you peace of mind, it’s not always a smart financial decision. If you have a personal auto insurance policy with collision, comprehensive and OPCF27 (liability for non-owned automobiles), a rewards credit card or even home insurance you may want to avoid purchasing additional coverage.
Here are the 4 types of insurance offered by rental car agencies and when you can avoid paying for them:
Loss/Collision Damage Waiver
Personal Accident insurance
Personal effects coverage
If you’re trying to lower your monthly cost of auto insurance, we recommend speaking with your broker, agent, or private insurer to see what options are available. Also, make sure to check the CLEAR table provided by the IBC to see how much your car costs ahead of its purchase. As well, if you’ve previously held insurance in another jurisdiction you may be able to apply for additional discounts. Here are some more tips to help you save:
Shop and compare
Use the internet to your advantage and shop with vroomvroomvroom.ca, autoslash.com, Costco, or Kayak to compare prices. Check the different agencies as well to compare the best rates.
Leverage loyalty programs
Many rental car agencies have loyalty programs that allow you to earn points and redeem them towards a cheaper rental.
Look for coupons
All the agencies will offer coupons, discounts, or even free days depending on your location and length of rental.
Take the economy car
Economy cars are usually the cheapest, but they also rent the most. You may get a free upgrade if they're all out of economy cars, but don't book something too small for your party.
Skip the airport
Often times, booking away from the airport saves you on the premiums airport locations charge for convenience.
Skip the insurance
If you have an auto insurance policy, home insurance, and a good credit card - you can likely forgo the insurance.
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Matt started his professional career at CARPROOF where he honed his marketing and analytical skills for over 3 years. Matt then took his wealth of experience to Ratehub.ca’s Toronto offices, working with insurance providers, agents, and brokers to grow and expand the Insurance business unit. He is a thought leader in the community and a valuable insurance resource to respected publications like the Globe & Mail, Toronto Star, Huffington Post, Yahoo News, and 680 news radio in Toronto.read linkedin bio
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