Car Insurance for Rental Cars in Canada & Ontario

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Whether you’re headed off on a family vacation or need a car to drive around town while yours is in the shop, it’s important to know how your existing car insurance applies to rental cars. When you rent a car, you are always offered insurance, but before you decline the coverage, it’s important to understand what you may be missing.

Rental Coverage Through Your Own Auto Insurance

Many people think that their car insurance policy will also cover cars that they rent. This is usually only partially true and could lead to big problems. Car insurance professionals recommend adding a rental car endorsement to fully extend your benefits to cars that you rent. If this coverage isn’t part of your policy, you probably have little or no coverage at all. For people who rent cars frequently, this coverage is worth the added cost.

Some drivers are under the impression that car insurance will cover a rental car is because they think they’re insuring themselves instead of the car they drive. That’s not the case. The insurance actually follows the car, meaning you are not automatically covered in any car you choose to drive, including rental cars. A rental car endorsement will extend your insurance to any car you rent. Collision, comprehensive, and other coverage can all be carried over.

Should you get the company’s rental car insurance?

When you rent a car, most companies will try to sell you collision damage waiver coverage. The coverage goes towards any damages on the vehicle that occur when you are in possession of it. The coverage provided by rental companies is a good idea only for those who don’t have other car rental coverage.

This comes at a cost that can exceed the daily cost of the rental itself. It’s also important to distinguish that the collision damage waiver is not an insurance policy. It is merely a document that transfers damage costs from you to the insurance company. Because of this, the waiver is not bound to any provincial insurance rules. The fine print is up to the rental car company. It’s important that you understand what is and isn’t covered. For instance, driving on gravel roads may void the collision damage waiver.

Other Car Rental Coverage

You may have car rental coverage through membership to certain credit card programs. For this to activate, you may need to rent from car rental companies associated with the program using the credit card in question to pay for the rental. The details of such coverage are likely to differ between credit card companies, so check prior to relying on that coverage. If you’re not in a program that offers car rental coverage, you may be able to add it for a fee that’s usually affordable compared to collision damage waivers if you rent cars regularly.

Regardless of which type of car insurance you choose for a rental car, make sure you are fully covered before you set out on your trip. Ask how claims work before you sign a rental agreement and always keep copies for yourself. For a complete overview of car rental insurance coverage in Ontario, consult the Financial Services Commission of Ontario.

Renting a Car in Ontario

Anyone who’s ever rented a car advertised at a low daily rate, only to find the price double or triple after rental company insurance or the collision damage waiver, is applied knows that things aren’t always as they seem. If you’re renting a car in Ontario, there are things to know that could help you bypass extra costs and false assurance that you’re adequately covered.

Hidden Car Rental Costs

hidden cost

Also known as loss damage waivers, this insurance-like protection transfers the responsibility of payment for car damage from you to the renting company. It’s a daily charge added on top of the car rental rate. The Financial Services Commission of Ontario advises that you should know you have alternatives to car rental company waivers. The FSCO warns that these waivers may include fine-print gaps in coverage. For example, if you drive a rental car on an unpaved road, damage to the vehicle such as stone chips or windshield cracks may not be covered. What is and isn’t covered by rental company waivers varies between renters.

Car Rental Cost-Cutting Tips

You may be eligible for low or no-cost alternatives to the collision damage waiver. Here are some examples:

  • Through credit card companies – You may have collision coverage on your rental through program features from your credit card provider. Typically, to enable coverage you must charge the full amount of your rental to the card and decline the rental company’s waiver. There may be other conditions as well, such as using only rental companies approved by your credit card provider. Check with them to see what conditions apply to your account.
  • Through your own car insurance policy – Additional coverages on your policy are called endorsements. Many policies include endorsement OPCF 27, Legal Liability for Damage to Non-Owned Automobiles. More commonly it’s known as the rental vehicle endorsement. This section of your policy, if it’s enabled, you’re already covered for collision damage in a rented car within Canada and the U.S. (You will require another means if you are renting a car internationally). Adding OPCF 27 coverage to your policy is very affordable, particularly when compared to the costs of collision damage waivers purchased through car rental agencies.

No Collision Damage Waiver

If you opt not to purchase the waiver, and if you’re not covered under a third-party arrangement, damage to the rental car while in your hands may end up costing you. Most insurers will require that you have some form of coverage if you decline their waiver, but they will take you at your word that OPCF 27 or credit card coverage is in place. If you deliberately make a false declaration on this, you may be liable for fraud charges, as well as all damage costs.

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