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Compare rental car insurance coverage

Compare providers and learn when it might be safe to cut corners on rental car insurance. 

Renting a car can be a daunting task, especially when you throw buying the right insurance for your needs into the mix. In some cases, you may want to purchase rental car insurance while in other cases you’ll already be covered by your credit card or some other form of personal insurance.

Find out more about when you might want to purchase a rental car policy and when it makes sense to fall back on other alternatives.

What is rental car insurance?

Rental car insurance is an added layer of insurance that you can purchase to cover yourself and others against bodily harm or vehicle damage due to a collision. It can also help to protect your rental vehicle or personal belongings in the event that they are stolen or damaged.

Depending on what type of car rental insurance you have or decide to purchase, you’ll be covered for different situations. The purpose of getting insurance with your rental agency is to prevent it from being able to come after you if you run into a problem with your rental car.

What types of rental car insurance are there?

There are four main types of rental car insurance in Canada. You may be required to add all four to your bill to ensure full protection or you may be able to pick and choose based on what coverage you already have from other sources.

1. Loss damage waiver or collision damage waiver

Loss damage waiver (LDW) or collision damage waiver (CDW) insurance protects your rental car for damage up to its original value in most cases. This coverage ensures that the actual costs of your rental car will be paid for if you get into an accident or your vehicle is stolen.

This insurance costs up to $30 per day, but you may be able to decline this type of coverage if you have it on your credit card or your personal car insurance. Just be aware that your credit card coverage likely tops out at $65,000 and may not include exotic or luxury cars.

Key features

  • Best for vehicle repair or replacement
  • Costs up to $30 per day
  • Can be substituted by your credit card or personal car insurance
  • Does not cover medical expenses for you or other drivers
  • Does not cover vehicle damage for other drivers

2. Rental car liability insurance

    Liability insurance covers you for any vehicle damage or injury that you may inflict on other people while driving in a rental car. This type of insurance won’t cover your own medical costs or vehicle damage, so you’ll want to make sure you get extra coverage to protect yourself.

    This coverage may be included in the cost of your rental vehicle already (as it’s mandated in some provinces). You may also be covered for this type of insurance by your own personal car insurance, which can sometimes extend to rental vehicles.

    If you need to add this insurance on, it will typically cost you around $10 per day. That said, you may be able to turn it down if you have a car insurance policy with $1 million to $2 million in liability. You’ll just need to have an OPCF 27 endorsement on your policy, which is a bit of fancy paperwork that states that your coverage extends to your rental car.

    Key features

    • Best for covering damage or medical expenses for other drivers
    • Costs up to $10 per day (though may be included in rental price)
    • Can be substituted by your personal car insurance (with an OPCF 27 endorsement)
    • Does not cover personal medical costs or damage to your vehicle

    3. Personal accident insurance

    Personal accident insurance (PAI) is meant to cover any costs that you might incur for your own medical bills in case of an accident. It’s also extended to any passengers you might have in your vehicle (though passengers are typically insured for less).

    Depending on your insurer, you’ll usually pay around $10 per day for this coverage, which may or may not include accidental death and dismemberment (AD&D). This type of insurance is a safe bet for drivers who aren’t covered to drive rental cars under their personal car insurance.

    Key features

    • Best for covering your own medical expenses
    • Costs up to $10 per day
    • Can be substituted by your personal car insurance
    • Does not cover damage to your rental car
    • Does not cover medical or vehicle repair costs for other drivers

    4. Personal effects coverage

    Personal effects coverage (PEC) is typically bundled with PAI to give you coverage for any belongings you carry with you in your rental car. This means that you’ll get a certain amount of money back if your possessions are stolen or get damaged in a collision.

    This type of insurance costs up to $5 per day and typically covers you for about $500 worth of stuff. It isn’t as necessary as some of the other forms of insurance, especially if you don’t intend to be travelling with anything valuable.

    Key features

    • Best for covering damage to your personal belongings
    • Costs up to $5 per day
    • Can be substituted by your home insurance policy
    • Does not cover vehicle damage or medical expenses for you or other drivers

    Does it make sense to buy rental car insurance with an agency?

    Whether you should purchase rental car insurance will depend on a number of different factors. These can include what other types of coverage you have through your personal car insurance, travel insurance, home insurance or credit cards. They also include what type of car you want to rent, whether you’re visiting from overseas and whether or not you want extended coverage.

    One of the main benefits of purchasing car rental insurance with your rental agency is that you’re guaranteeing that it can’t come after you in case of a problem with your vehicle. If you rely on another form of insurance, such as your credit card, it could take a long time to process your claim. This could cause issues with the rental agency pursuing restitution in the short term.

    When should I consider buying rental car insurance?

    There are a couple of scenarios where you might want to pay more for full coverage. These include the following:

    • You don’t have coverage on your credit card. You may want to get LDW or CDW insurance on your rental car if you don’t have a premium credit card offering this coverage.
    • You don’t have an OPCF 27 endorsement. You should pay for extra insurance if you don’t have an OPCF 27 endorsement on your personal insurance that’s transferable to a rental car.
    • You’re travelling for business. You may not be covered by your personal insurance if you have to rent a car to carry out your job. You should speak to an agent about travelling for work before turning down your rental car insurance.
    • You’re renting an expensive car. Luxury and specialized vehicles typically come with a higher price tag. They’ll often cost more than your personal insurance will cover, which means you should consider buying extra coverage at the counter.
    • Your personal policies only cover the bare minimum. You may want to add supplementary insurance if you don’t think the coverage you have on your personal policies will offer enough protection.
    • You’re traveling outside of Canada. Your personal insurance policies may not apply when you travel internationally. It’s best to make sure that you have the right coverage for your destination.

    Is it possible to avoid paying extra for rental car insurance?

    Paying for car rental insurance is a bit of a double-edged sword. On one hand it can give you peace of mind while on the other hand it can add unnecessary expenses to your trip. The best way to avoid paying for insurance is to look into what’s covered under your other policies, such as your life, home, car, travel and credit card insurance.

    • Rental car insurance on your credit card. Many premium cards will cover car repairs in the event of a collision. This will let you forego LDW/CDW insurance (though you won’t be covered for medical).
    • Emergency medical on your credit card. You may be able to skip the PAI if you’re traveling abroad and have emergency medical on your credit card. Just check in with your provider to make sure you qualify.
    • Personal car insurance (with OPCF 27 endorsement). You can typically waive all forms of rental car insurance if you have personal car insurance with a specific OPCF 27 endorsement for car rentals. Just make sure to check the specifics of your policy for coverage details.
    • Life insurance. You may be able to decline PAI if you have a life insurance policy or health benefits that cover short- or long-term disability. You’ll just need to check in with your insurance provider to make sure you’re eligible.
    • Travel insurance. You could be covered for medical expenses if you’re a visitor to Canada or travelling outside the country with a comprehensive travel insurance policy. Make sure to ask your provider if you can skip the PAI.
    • Home insurance. This type of policy could help to protect your personal belongings in the event of damage or theft. You should double-check if you can turn down PEC to protect your valuables.

    What’s not covered by car rental insurance?

    There are a couple of incidentals that won’t be covered by car rental insurance. For example, you may not be covered for damage to the tires or cracks in your windshield due to the frequent nature of these types of events.

    You may also void your rental car coverage if your vehicle gets damaged or stolen due to gross negligence on your part. This could include driving under the influence or leaving your vehicle unlocked or unattended with the keys in the ignition.

    The best way to find out what’s excluded is to carefully read your car insurance contract before you sign on the dotted line.

    How can I save money on my next car rental?

    There are a handful of ways to drive the price of your car rental down. You may be able to test out the following tips to save a few bucks on your next trip:

    • Compare providers. Make sure to compare car rentals from a number of different providers before you decide on the right fit for you.
    • Find a loyalty program. You may be able to consistently book with a specific rental company to qualify for discounts in the long term.
    • Look for credit card discounts. Many credit card companies offer special discounts with bigger companies like Budget and Alamo Rent a Car.
    • Look for online coupons. You may be able to apply a discount code at checkout if you purchase your insurance online.
    • Skip the luxury vehicle. Think about renting a compact or economy car if you don’t need much room and you want to save money.
    • Avoid the airport. Avoid booking a rental car directly from the airport as you’ll typically pay way more for the convenience.
    • Skip the insurance. Look into your other insurance policies to see where you’re already covered – and be sure to find out what your credit card offers before you book.

    What types of credit cards offer car rental insurance?

    Many premium, travel and business cards offer car rental insurance as an added feature. This will most often cover you for damage and theft to your vehicle (though it won’t cover you for medical or legal costs in a collision). You may also find that your credit card includes roadside assistance and discounts on fuel and car rentals.

    Most credit card companies will need you to turn down the rental company’s CDW or LDW insurance to qualify for their insurance. You’ll also have to charge the full amount of the car rental to your credit card and you’ll need to borrow it using your full legal name. In addition, most credit card rental coverage will only cover the primary cardholder – so be careful who you let behind the wheel of your rental.

    Compare credit cards that offer rental car insurance

    Name Product Purchase Interest Rate Cash Advance Rate Annual Fee Car Rental Perks
    BMO CashBack Mastercard
    22.99% (21.99% for Quebec residents)
    Get up to a 25% discount at participating National Car Rental® and Alamo Rent A Car® locations.
    Get 5% cash back on all eligible purchases in the first three months of card membership (up to max. spend of $2,500). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
    Tangerine World Mastercard
    Charge the full cost of a rental vehicle to your card, and get complimentary damage and theft protection for up to 31 consecutive days.
    Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until January 31, 2022. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
    American Express Cobalt Card
    Get complimentary Car Rental Theft and Damage Insurance (MSRP of up to $85,000). Terms apply.
    Earn up to 50,000 Membership Rewards points in your first year. Earn 2,500 Membership Rewards points for each monthly billing period in which you spend $500 in net purchases on your card (up to 30,000 points). Plus, earn a Welcome Bonus of 20,000 Membership Rewards points when you spend a total of $3,000 in purchases on your Card in your first 3 months of Cardmembership.
    Scotia Momentum Visa Infinite Card
    2.99% intro APR for the first 6 months, 20.99% thereafter
    $0 annual fee for the first year ($120 thereafter)
    Up to 25% discount at participating Budget and AVIS car rental locations in Canada and the US
    Earn 10% cash back on all purchases for the first 3 months. Plus, pay no annual fee in the first year and get a 2.99% introductory interest rate on purchases and balance transfers for the first 6 months. Apply by February 28, 2022.
    BMO World Elite Mastercard
    23.99% (21.99% for Quebec residents)
    $0 annual fee for the first year ($150 thereafter)
    Get complimentary Collision Damage Waiver benefits (MSRP of up to $65,000).
    Get up to 60,000 points and get the $150 annual fee waived in the first year. Plus, get 4 free airport lounge passes worth $162.

    Compare up to 4 providers

    Bottom line

    Rental car insurance is a necessary expense for some, but it can be substituted by other forms of insurance in many cases. Find out how you can avoid paying for car rental insurance at the counter and learn when it might make sense to do so.

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