Rental Car Insurance

Everything Canadians need to know about car rental insurance to save money for your vacation

What is rental car insurance?


Rental car insurance comes in many forms. The 4 options are loss damage waiver (LDW), collision damage waiver (CDW), personal effects coverage (PEC), personal accident insurance (PAI), and liability. Each type of coverage is there to protect you, your passengers, the rented vehicle, your personal belongings, and any injuries that may occur, or 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. If you pay for the different coverage options, it means they can’t pursue you for any damages.

Types of car rental insurance coverage

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:

Coverage Description
Loss Damage Waiver & Collision Damage Waiver

Protects you from charges related to theft and collision of the rental car. 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.

When should you purchase rental car insurance?

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.

Here are some instances where you should consider buying car rental insurance:


1

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.

2

Your auto insurance policy doesn't have OPCF27 endorsement

In order to be covered for liability and personal accident insurance, your auto insurance policy needs the OPCF27 (liability for non-owned automobiles) endorsement to be transferable to a rental car.

3

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.

4

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.

5

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.

6

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.

7

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.

When can you avoid purchasing rental 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:

How to save money on a car rental?

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 coupoons

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 forego the insurance.

Frequently Asked Questions about rental car insurance

Other helpful car rental resources

Check out our insurance blog