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Do you need to buy rental car insurance?

Sept. 19, 2022
5 mins
A man drives a convertible down a winding road on a sunny day

Whenever you pop into a car rental agency to rent a vehicle, the customer service representative always asks whether you wish to purchase rental car insurance. If you didn’t think it through beforehand, it could be a head-scratcher. Do you opt in and purchase the rental agency’s insurance policy on top of the cost of the vehicle? Or do you decline it and save a few bucks?

Rental companies typically offer four types of auto insurance for their fleet:

  • Collision damage waiver — This protects you from paying for any damage to the rental car, or if it is stolen.
  • Supplemental liability insurance — This protects you and any other authorized driver against third-party injury, death, and property damage claims.
  • Personal collision insurance — This covers you and your passengers for any medical expenses resulting from a collision.
  • Personal effects coverage — This pays for losses, theft, or damage to any personal items you have inside the rental car.

Do you need to shell out the extra cash for any of these protections? Is it in your best interest to opt in for all four coverage types?

The answer lies in whether you have rental car coverage elsewhere already. Many credit cards and auto insurance policies provide coverage for when you rent a car. But you need to be sure. If you’re not sure, call your credit card issuer and insurance broker or agent to find out ahead of time. You don’t want to get into a collision, have no insurance, and be on the hook for thousands of dollars.

Also, know that if you have an at-fault collision with a rental vehicle (where you are more than 25% at fault, regardless of who pays the damage claim), the collision will still go on your driving record.

Does your credit card provide car rental insurance?

Different credit cards offer different insurance benefits. Rental car insurance is standard on some cards; with others, you may need to pay extra for this coverage. It’s best to contact your credit card issuer to get the lowdown on your coverage options and limitations.

For example, collision damage coverage may only apply when renting automobiles from companies approved by your credit card company, and when using your credit card to pay for the rental. If you are not paying for rental car coverage through your credit card, you are personally liable for the rental vehicle if you get into a collision. See the best Canadian credit cards that include rental car insurance benefits.

How to check if your auto insurance policy provides coverage for a rental vehicle

Most Ontario auto insurance companies offer additional coverage for damage to vehicles that you don’t own. Formally known as Ontario Policy Change Form (OPCF) 27 or "Legal Liability for Damage to Non-Owned Automobiles,” this endorsement provides you with coverage for any vehicle you drive but do not own when you pay extra to add it to your car insurance policy. That includes rental cars or if you borrow a friend’s car. OPCF 27 tends to be a more economical option than purchasing a rental company’s collision damage waiver.

If your auto insurance policy includes OPCF 27, you don’t need to purchase additional coverage from a car rental company.

Car insurance companies in Alberta offer a similar endorsement, but it’s called Standard Endorsement Form (SEF) 27. SEF 27 allows you to transfer your personal vehicle’s physical damage coverage to your rental vehicle.

Err on the side of caution and give your insurance provider a call before you pick up a rental vehicle to make sure you have coverage. Also, be aware OPCF 27 and SEF 27 are valid only in Canada and the U.S.

How to get rental vehicle insurance for a car rental outside Canada and the U.S.

If you’re renting a car outside of Canada and the U.S., do a little homework and find out what your insurance options are.

Even if you have OPCF 27 on your auto insurance policy, it will not cover you for driving a rental vehicle in Mexico, for example. Or if you rent a car in Europe, the rental vehicle insurance endorsement on your auto policy will not apply. The same goes for the rental car insurance your credit card may provide. If you are driving a rental car outside Canada or the U.S., it’s a wise idea to buy the rental company’s insurance.

Do you need to purchase truck rental insurance?

Driving a large truck or cube van is another matter when it comes to auto insurance. The coverage options are like those for rental cars. Truck rental insurance includes damage waivers, supplemental liability insurance, personal collision and cargo protection, as well as auto tow coverage, which you will need if you are using a rental truck or trailer to tow your car.

Before you decline truck rental insurance from the rental company, make sure to check you have coverage through your credit card or auto insurance policy. Even if you have coverage for a rental car, you may not have protection for a rental truck, specifically. In this case, it may be wise to buy the rental company’s insurance policy.

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The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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