You've decided to rent a car to take your family on a summer road trip. You get to the car rental facility, pick your car, and you are just about ready to take off when the agent springs one more question on you: Do you need insurance?
Rental car insurance usually includes a couple of different provisions, and you can pick and choose which coverages you need for your rental period. Each coverage usually comes with an added daily cost, which can quickly add up if you are taking an extended trip. That extra cost might seem pointless, especially if you are already covered by your own auto insurance policy. But do you know how well you really are covered? Which, if any, of the rental car coverages should you purchase?
Types of Rental Car Insurance Policies
Rental car agencies in Canada will generally offer the following types of insurance policies or waivers. Each one has its own associated costs. For the most part, these plans are designed to provide additional protection for costs not covered by your primary auto insurance or liability protection that is provided by most credit cards.
Collision and Loss Damage Waiver (CDW, CLW, or DW)
This optional coverage covers expenses related to damage to the vehicle that you are renting and can cost up to $30 per day. If you opt for this coverage, the rental company won't hold you liable for damage in the event of a fire, theft, or accident. If something happens to put the vehicle out of commission, rental car companies often charge fees for lost revenue, towing costs and resale depreciation as well. Without a damage waiver, all of these costs could be charged to you if you don't have other insurance coverage.
The good news is that your auto policy should cover these expenses as well, but you better call and make sure before driving your rental car off the lot. One reason to opt for a damage waiver anyway would be if you have a high deductible with your auto insurance plan. Many credit card companies will provide you with a built-in damage waiver that would kick in and cover your deductible in the event of an accident. However, different credit card companies have different waiver policies and some are better than others.
Get it or not? If you have confirmed that your auto insurer and your credit card provide sufficient protection, this is one rental car add-on that you can probably skip if the extra expense is too much.
Liability insurance covers the cost of damage or injury to other people caused by your operation of the rental vehicle. This is often included with a rental, and some provinces require that rental car companies provide liability coverage free of charge. That's because vehicle liability insurance in most provinces follows the owner of the vehicle, which in the case of rental vehicles is the rental company. In some cases, rental car companies will offer supplemental liability Insurance coverage which can cover you above the minimums mandated by law.
Get it or not? You might consider paying for additional liability coverage, depending on the minimum amount of coverage provided for you by the rental car company and your own auto policy. However, the liability coverage mandated by the rental agency is usually sufficient.
Personal Accident Insurance (PAI) and Personal Effects Coverage (PEC)
This supplemental policy offered by some rental companies covers you and your passengers' medical bills in the event of an accident, or pays out a lump sum in the event of any fatalities. Some PAI policies offered by rental car companies are bundled with Personal Effects Coverage, which provides protection for your personal belongings if they are stolen or damaged in an accident. This coverage can cost up to $10 a day.
If you have personal auto insurance, you should have an accident benefits policy that protects you already from medical bills and provides benefits in case of death.
Get it or not? Yes, if you don't have a personal auto insurance plan that covers your medical bills. If you have personal auto insurance with an accident benefits policy, you most likely don't need to get it from the rental car company as well.
If you think you might need the bundled PEC plan for your luggage and other belongings, compare the cost and benefits with a travel insurance policy which can provide similar protection for personal items and many other benefits.