Don’t overpay for Rental Car Insurance or assume too much Risk

Posted by Injury Lawyers of Ontario on June 01, 2019

The expense of renting a car can be much higher, even double, if you elect to purchase car insurance through the car rental agency, particularly if you purchase insurance both to cover damage to the rental car as well as third-party liability.  To avoid paying more than you should, or for coverage you already have, before purchasing vehicle insurance, find out whether you are already covered for one or more of these coverages on own vehicle policy, your credit cards, and/or through the rental car agency.

Do you need to buy ‘Collision damage waiver’ coverage when travelling?

When you rent a vehicle, most car rental companies offer insurance protection called ‘collision damage waiver’ (CDW) or ‘loss damage waiver’ (LDW) to pay for loss or damage to the rental vehicle that occurs while it’s in your care.  If the rental vehicle is damaged or stolen, this coverage prevents you from being responsible for the costs of repairing or replacing the vehicle.  However, be aware that the damage waiver policy may have exclusions, such as no coverage if you drive on unpaved roads. 

Also remember that CDW and LDW won’t pay for medical expenses if you are injured in a rental car accident or another circumstance while travelling, so it’s a good idea to purchase separate travel health insurance if you don’t have out-of-country health insurance through another plan.

Before purchasing ‘collision damage waiver’ from the car rental company, find out whether you already have this coverage through your credit card or your existing vehicle insurance policy.  Many credit cards provide collision damage for cardholders who are renting a car; but you likely have to charge the vehicle rental (and vehicle reservation) to the given credit card in order to qualify for this benefit.  CDW from your credit card company is generally your cheapest option and often has the added benefit of ‘no deductible’.  Finally, find out whether there is a restriction on the number of days you are covered (i.e. the maximum may be 30 days) and also, whether any countries are excluded from coverage.

Your current vehicle insurance company may already provide the insurance you need. If you currently have collision and comprehensive coverage for your own vehicles, you are likely covered for damage to a rented vehicle, as long as it's not being used for business reasons.  However, be aware that the same deductibles apply for the rental car, as on your owned vehicles.

If you travel often, you may consider purchasing a rider on your vehicle insurance policy to cover you for damage to unowned vehicles, such as rental cars. This coverage is referred to as ‘Legal Liability for Damage to Non-owned Automobiles’, the ‘Rental Vehicle Endorsement’ or ‘OPCF 27’, and is generally only valid for rentals in Canada and the United States, and for vehicle rentals in the same name(s) as are covered on your regular vehicle insurance.  In any case, it’s always a good idea to check with your insurer to find out what coverage you have and the conditions under which you’re covered.  And, take your insurance policy information with you when you travel. 

If you’re more than 25 percent at-fault in an accident, and the car accident information is relayed to your insurance company, it will count against your driving record regardless who pays for the damages.

Liability Coverage covers damage caused to another vehicle or person

Your personal vehicle insurance policy provides coverage for damages caused to other vehicles or persons while driving a rental vehicle, up to the limits of your policy.  By law, standard Ontario vehicle insurance policies must provide a minimum of $200,000 in third-party liability coverage, but many policyholders elect to have $1 Million or more in coverage.  However, liability coverage provided by your vehicle insurer generally doesn't cover rental car accidents outside Canada and the U.S. 

Not unlike collision insurance, some credit cards also provide coverage for third-party liability. Again, you should check with your credit card provider to find out exactly what types and the amount of coverage that is provided.  Also, your credit card may not provide car accident liability coverage for certain types of vehicles, including ATV's or expensive vehicles such as a Lamborghini or Jaguar.  

Rental car companies in Ontario are also obligated to provide a minimum of $200,000 in third-party liability coverage for damage/injury caused to others, but many rental companies carry higher amounts of coverage, often $1 Million.  Persons who do not own their own vehicle in Ontario must rely on the rental company coverage, and in Ontario, there is no provision for increasing the amount.  The concern for many people is that $200,000 is generally sufficient for minor car accidents, but it may not be enough if another party is seriously injured and the accident was your fault. 

Rental car companies in other jurisdictions, including United States, may be required to provide only a low amount of third-party liability coverage, which can be inadequate in all but the most minor collisions.  Mandatory minimum liability coverage differs from state to state and may be as low as $15,000, so it’s generally a good idea to purchase third-party liability coverage from the U.S. rental company, where the law allows you to do so.  And, in U.S., if you accidentally injure another person, you may face a lawsuit in the millions since most states don’t limit the amount that may be awarded for pain and suffering, until in Canada.  Also, persons with no medical coverage in the U.S. typically incur much higher medical costs than Canadians if injured, and these expenses would be reflected in a personal injury lawsuit.

Car rental outside the U.S. and Canada

When you’re renting a vehicle outside Canada and the U.S. and if you’re not fully covered for collision and third-party liability through your own vehicle insurance, credit cards or another insurance provider, demand full clarification from the car rental agency on what coverage is provided automatically with the rental and what are the deductibles.  In Europe, for example, car rental companies generally include third-party-liability coverage with the standard rental agreement and at no extra cost.  However, they don’t provide CDW or LDW insurance (to pay for damage to the rental car) for free, so you need to purchase this coverage if you aren’t already covered on another plan. 

Also, be aware that the collision insurance policy provided by the car rental company may have a $1000-$2000 deductible even if the damage wasn’t your fault, although the company may offer more comprehensive coverage with lower (or no) deductibles for an extra fee.   Also, the standard collision policy may not protect you against theft.  So, these are questions you need to ask when you rent.

Further, if you buy CDW from a vehicle rental agency in Europe, be sure to tell them if you will be driving the vehicle into other countries, if applicable, since this may impact the type of coverage you need.  In Italy, you have no choice and must purchase CDW and theft protection insurance from the car rental agency.

Finally, if you're relying on vehicle insurance through your credit card company, find out if there are any countries excluded from coverage, since your credit card may not cover car accidents in parts of the world which have very high rates of accidents and/or car theft. .

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