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How “loss of use” rental car coverage is being tested in today's market

June 16, 2022
5 mins
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The unthinkable happens — you get into a collision and your vehicle has been damaged beyond a drivable condition. Though you may have chosen to add the “loss of use” insurance endorsement to your auto insurance policy when you set it up, today’s auto supply shortages are putting this coverage to the test.

Normally, the repair might have taken a week or two, but with the auto part and rental vehicle shortages in the current market, it may take much longer for you to be back on the road, whether in your vehicle or a borrowed one.

Will your insurance provider allow for a longer car rental and extend your “loss of use” coverage? As it turns out, the answer isn’t definitive.

Vehicle repairs taking longer than normal

The length of time it may take for your vehicle to be back up and running varies according to the severity of the damage and the repairs that need to be performed. Add to that current market factors, where global supply chain issues are impacting the availability of auto parts, and it’s hard to say how long vehicle repairs will take — and how long your insurance company is willing to foot the bill for your rental car.

“In the past, ‘loss of use’ could be up to 30 days,” says Anne Marie Thomas, director of consumer and industry relations at the Insurance Bureau of Canada. “However, in these unprecedented times, insurance companies may settle on a case-by-case basis.”

That wasn’t the case for one Ontario driver, who received only 16 days of rental vehicle coverage under his policy and was expected to pay out of pocket for the remainder.

If your repair is expected to exceed a regular wait time due to a backlog of replacement parts, ask for a time estimate from the auto shop that’s servicing your vehicle. This will help you keep your insurance company informed of your rental needs well in advance.

Shortage of rental vehicles

Since 2020, the number of rental vehicles has diminished after rental companies carried out the standard practice of selling off their one- or two-year-old cars and were unable to replenish their inventory.

A Statistics Canada report found that the size of rental car fleets dropped by more than 30% in British Columbia in 2020. And though rental fleets began to recover in 2021, they didn’t return to pre-pandemic supply levels by any means.

This year, rental companies continue to struggle finding inventory, as rental fleets are still 15-20% below normal levels. However, if you do opt for a “loss of use” endorsement to cover your transportation costs while your vehicle is being repaired, your insurance provider will attempt to honour it; it just may take longer than usual to find an available vehicle.

How long does rental car replacement coverage last?

The “loss of use” endorsement will typically last until your vehicle repairs have been completed, a settlement has been reached if it was a total loss, or if you have reached your coverage limit, whichever comes first. Different limits are available for this coverage so check with your insurance provider before renting a vehicle after you’ve had a collision.

Keep in mind, this coverage only applies if the loss of use is caused by an insured peril, and may require you to have comprehensive or collision coverage already in place. Since “loss of use” is an optional coverage, you’ll have to ask your insurance provider to add it to your policy and pay extra for it.

Before opting for the endorsement, it may be a good idea to inquire about terms and conditions around extensions. Discussing the endorsement with your insurance company can help you get a better understanding of the current rental market and whether the added cost is worth the quality of service available to you.

And ultimately, it’s best to proceed with patience if you’re in need of a rental vehicle. Post-collision, you just need a safe vehicle to get from point A to point B — so you might need to adapt — and so will your insurance company.

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Scott Marshall

Scott Marshall has spent over 30 years promoting road safety across Canada. He has seen many things from inside the vehicle while training new drivers, retraining licensed drivers, and training new driving instructors. Scott began writing road safety articles in 2005 for a community newspaper and has moved on to more publications from there.

In 2005, Scott was an on-air judge on the Discovery Network's Canada's Worst Driver program for its first three seasons. That gave Scott insight with regards to what makes bad drivers so bad. He was also the host of The National Driving Test internet webisodes.

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