Guide to Rental Car Insurance

It’s common for companies to attach an extra hook to the service they provide. Supermarkets are designed in intricate detail, from smells and music to the font of price tags to prize draws, to entice you to spend more than you intended. Likewise, a rental car business will make you feel silly for not also purchasing optional car insurance for your rented vehicle.

But hold on a second, doesn’t your auto insurance already cover car rentals? If you want to avoid situations where the salesman has the upper hand, and you don’t feel confident enough to refuse their offer, look no further.

What Is Rental Car Insurance?

Everyone who has passed a driver’s license exam knows that you must get auto insurance as soon as you buy a car in your name. There are no exceptions to this in any Canadian province, which makes car insurance as ubiquitous as health insurance. These mandatory car insurance plans have different coverages. Some may cover just you or your car, while other plans cover injuries to passengers and pedestrians or cover damages to other vehicles or property.

Therefore, we can separate Canadian car insurance into three tiers:

• Third-party liability. Covers vehicular mishaps that result in someone else’s injuries and damages. It is mandatory in Canada. 
• Collision. Covers damage to your own car, even if it is your fault, but it has no personal effects coverage.
• Comprehensive Insurance. Covers not only collisions and third-party culpability (your car damaging another person’s) but also theft and vandalism. In certain countries, this is more needed than in others. For example, France and Sweden have become infamous for annual mass car burnings.

The minimum car liability insurance in Quebec is C$50,000, and it is at least C$200,000 in all other provinces. Rental car insurance is an optional coverage offered by the salesperson. They will always make this offer because they earn a commission, so check if your insurance policy is still active so you don’t pay for something you already have.

Collision Damage Waivers (CDWs) & Loss Damage Waivers (LDWs) 

Once you have decided to rent a car, the salesperson will offer a waiver. Depending on the car rental company, it will be either called a loss-damage waiver (LDW)—or a collision-damage waiver (CDW).

These simply mean that the car rental company won’t pursue you financially in the event of car theft or damage. You may be thinking that if you already have collision insurance, this will also extend to the rental car. You would be correct in that assumption. However, the devil is in the details.

Even if you have both comprehensive and collision insurance, you will still have to pay for the deductible if you don’t have a CDW or LDW. Therefore, in some circumstances taking the offered waiver could make sense.  

Rental Car Insurance Or Your Own Auto Insurance?

If you have the foresight to already own collision auto insurance, this will likely extend to a car rental. Unfortunately, this varies from region to region. You will not find the same coverage in Europe as you would in Canada, Mexico, or the US.

In any case, if you refuse the CDW or LDW and count on your personal auto insurance, you will still most likely have to pay the deductible in the event of an accident, and it might even raise your insurance rate.

Using Your Credit Card For Rental Car Coverage

You may have missed the fine print in your credit card contract, but you will find that most credit cards include collision coverage for your car rental. Depending on which credit card you use, some may offer full primary collision coverage, which covers the total costs incurred in the event of a claim. Others may not. Specifically, VISA doesn’t account for administrative costs. 

However, it would be prudent to still hold personal car insurance. Credit cards only cover the first instance that you can’t cover with your insurance. To make things more complicated, car rental companies require upfront payment, for which you will have to seek reimbursement from the bank that issued your credit card.

Moreover, to get that reimbursement, the car rental agency must provide the credit card company with a record of rental and loss, which may not always be forthcoming.

Buying Rental Car Insurance On Your Own

In line with the same level of collision coverage as offered by most credit cards, you can opt for the most cost-effective solution—third-party car rental insurance. In particular, travel/tourism agencies offer such collision coverage, which could be as much as three times cheaper than the insurance that the car rental salesperson will try to persuade you to take.

How Much Does Rental Car Insurance Cost?

Getting customers to accept their proffered car insurance is a financial boost for both employees and rental car companies. For this reason, you should always seek insurance options from a specialized insurance company instead. You will almost always come away with a healthier bank account. 

Rental car companies’ CDWs are often so expensive that they may cost half as much as the car rental itself—between CA$14 and CA$30 per day. For comparison, an average rental car cost is CA$61 per day. As you can see, this represents a major source of their income.

If you take US-Canada trips, Allianz Global can go as low as CA$11 per day, while Bonzah offers car rental insurance at CA$10.30 per day. Additionally, Rental Cover has a no-deductible insurance policy that serves as full primary coverage for rental cars.

Takeaway

Without question, your rental car needs coverage for damage, theft and liability—otherwise you could end up paying out of pocket. However, understanding your options, and what makes the most sense for you, can be challenging. Each bank and credit card company will offer something different. If you plan to use insurance through your credit card, call the company ahead of time to make sure you’re aware of the limits and have adequate coverage.

Frequently Asked Questions

Can I rent a car without insurance?

If you are over 25 years old, you can rent a car without insurance because all Canadian rentals are covered with third-party liability coverage. However, this policy excludes damage done to the rental car. This is why collision coverage is the go-to offer for car rental companies, credit card issuers, and travel agencies.

Is my credit card coverage sufficient?

Only as secondary coverage. This means that any damage claims will first be addressed to your car insurance company. The reason for this is that such features are designed as one key fits all locks policy. Nonetheless, this is a viable option if you refused CDW/LDW insurance from the car rental company.

Just keep in mind that credit card rental insurance will not provide third-party liability, ie personal injury protection to another person. Likewise, you will have to check if the credit card coverage excludes certain categories of rental vehicles, such as motorhomes, trucks, luxury cars, or motorcycles. 

Can I change or cancel my coverage if my rental plans change?

Companies like Rental Cover allow you to reduce or cancel your car rental insurance policies. However, be prepared for a compromise. Most insurance companies allow you to cancel entirely before you pick up the rental car. Once you are driving, you can still cancel or reduce some policies, but don’t expect to receive a refund. 

Are additional drivers covered under my policy?

If you have friends, roommates, or family members who would also use the rental car, they must be listed in your insurance policy. Of course, this may prove dangerous to your own premiums if additional drivers happen to have a poor driving record.

If you gave permission to an additional driver, they would be covered by your auto insurance plan. The max limit for additional drivers is usually four. If you need to go beyond that limit, you will have to pay a fee.