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Do I Need to Buy Extra Car Rental Insurance?

If you’ve ever rented a car in Canada, you probably experienced a moment of temporary confusion when asked if you wanted to purchase insurance for the rental car. It’s even possible that the confusion lasted more than a moment – and that you’re still wondering if you needed to buy the extra policy offered with the rental.

You probably won’t like this answer, but the answer is: it depends.

Here are some things to consider. If you already have an auto insurance policy in force, in most cases, the coverage that you’ve purchased for your personal policy will carry over to the rental vehicle. Your liability coverage will convey to the rented car in most cases, as will your collision or comprehensive coverage if you’ve purchased either coverage with your existing policy. If you haven’t purchased collision or comprehensive coverage on your personal auto insurance policy, you won’t have those coverages for the rental car either – unless you purchase insurance from the rental car company.

However, there are some exceptions and some situations in which you may not be covered. If you’re renting the vehicle for business use, your personal auto insurance policy may not provide coverage. Also, if you’re renting outside of Canada or the U.S., it’s unlikely that the coverage from your existing auto insurance policy will apply to your rental car.

The safest thing to do is to ask your broker if you will have coverage while being sure to be candid about whether the trip is for personal or business reasons and explaining where you’ll be driving the rented vehicle.

In a perfect world, your broker will tell you that you do have coverage and that your personal auto insurance policy will provide protection while driving the rented vehicle. That’s great, although there are still some other considerations.

What is the diminution of value?
If you’re involved in an accident in a rented vehicle, that vehicle will lose value – even if it’s repaired and looks as good as new. The legal concept for this is called diminution of value, and the rental car company can pursue you for the difference in value if their rental car is now marred by an accident history. Your personal auto insurance policy does not cover diminution, but if you purchase auto insurance from the rental car company, you’ll usually be covered. Occasionally, insurers have an agreement in place with certain rental car companies that forgives diminution losses if customers of that insurer rent a car from that rental car company.

What is the loss of use?
If you rent a car and are involved in an accident with the rented car, the rental car company can’t rent the car out again while the vehicle is being repaired. Imagine a situation where the parts needed for the repair aren’t readily available, taking the vehicle out of service for a longer duration. The car rental company can pursue you for the lost income during the time that the vehicle is out of service. As you can imagine, this expense can add up quickly. Again, if you purchase insurance through the rental car company loss of use is probably covered, but your personal auto insurance policy won’t cover the loss of use.

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