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By Aren Mirzaian
First published on November 16, 2021

3 minute read

MyChoice follows a strict content review process designed to ensure reliable and unbiased information.

Article Contents

When you’re vacationing, rental car insurance is probably the last thing on your mind. After all, you’re probably thinking about all the places you’ll go – not whether you’re at risk of a road accident. But is rental car insurance necessary? And, if so, what options do you have? Learn about the insurance requirements for renting a car in Canada.

Rental Car Insurance At a Glance

  • While not required in Canada, rental car insurance can provide financial protection for the driver, passengers, and vehicle in case of an accident.
  • You can purchase separate rental car insurance or shop options with your credit card or travel agency.
  • Depending on your chosen option, rental car insurance can cost between $10 and $30 daily.

Is Rental Car Insurance Mandatory in Canada?

Rental car insurance isn’t mandatory in Canada, but it can provide ample financial protection in case of an accident. Because third-party liability coverage is a requirement to operate a vehicle in Canada, a rental car typically already includes the legal minimum coverage.

Without rental car insurance, you must pay out of pocket for any potential accident or damages.

Types of Rental Car Insurance

So, you’ve decided on rental car insurance – which one should you get? Here are your options.

As its name suggests, personal accident insurance (PAI) provides up to $100,000 for the driver and $10,000 for each passenger in case of death and dismemberment. However, these amounts may vary depending on the insurance company.

Unlike regular liability insurance, which provides a lump sum payment in case of death, PAI covers medical costs for you and your passengers.

A loss or collision damage waiver will cover the costs if the rental car is damaged in an accident, stolen, or vandalized. These simple policies are similar to comprehensive and collision insurance but may charge additional fees for:

  • Lost revenue while the car is receiving repairs
  • Related administrative fees
  • Towing fees
  • Depreciated resale value

LDW/CDW typically costs between $10 and $30 daily.

Personal effects coverage (PEC) is an optional policy that provides financial compensation if your belongings are damaged or lost. PEC is often an add-on to PAI and provides up to $500 of coverage with a $25 deductible per person. 

Liability coverage provides financial compensation for severe harm or death, with experts recommending a coverage amount of between $1 and $2 million. You can purchase supplemental liability insurance (SLI) if you want to go beyond the minimum coverage amount provided by rental companies. 

If you already have personal car insurance, you can purchase additional insurance for a vehicle you don’t own. This endorsement is called the Legal Liability for Damage to Non-Owned Automobiles (OPCF 27). The average annual cost of OPCF 27 is $50.

OPCF 27 only applies to rental vehicles in Canada and the US and doesn’t carry over to other countries.

How Much is Rental Car Insurance?

The cost of rental car insurance depends on the company. However, most companies charge a daily average of $65, with up to $40 for insurance waivers.

How Long Does Coverage Last on a Rental After an Accident?

The duration of your rental vehicle’s coverage will depend on the insurance company providing it. Most of the time, insurers base the duration on an allotted amount. For example, if you purchase $50,000 of coverage, the coverage on the rental vehicle will last for as long as the $50,000 is still available.

It’s also common practice for the insurer to notify you of the coverage limit or duration once you make a claim.

How Long Will Insurance Pay for Your Rental Car After Accident?

Usually, an insurance company will pay for your replacement vehicle for a maximum of 30 days, which is enough time to have your damaged car fixed.

Alternatives to Rental Car Insurance

If you have a credit card or travel insurance, you may be surprised to know you already have rental car insurance by default.

Credit Card Coverage

Credit card holders can get collision damage on rented vehicles under the following circumstances: 

  1. They charge the total rental amount to the credit card.
  2. They decline the collision damage waiver from the rental company.

You can choose between two coverage types from your credit card company:

  • Primary coverage: The credit card company is the primary source of coverage.
  • Secondary coverage: The credit card company only covers the portion not covered by your personal insurance.

Note that credit card coverage amounts often pale in comparison to what dedicated insurance can provide. Most credit card companies cap coverage at $50,000 to $75,000.

Travel Insurance Coverage

Most travel insurance coverage includes rental car options as an add-on. Rental car insurance from travel agencies usually covers towing costs, salvage, fire department fees, and reasonable loss of use.

You might also consider the following insurance features for peace of mind when driving a rental vehicle:

  • Trip cancellation or travel disruption
  • Travel health insurance
  • Medical evacuation insurance

Key Advice from MyChoice

  • Note that coverage from your credit card or travel companies may charge a deductible for insurance. They also exclude specific types of damage, such as damage incurred from diving off-road or under the influence.
  • If you’re purchasing rental car insurance through your personal policy, it’s best to discuss your options with your insurance company directly. 
  • You can save money on rental car insurance by purchasing your policy before you reach the airport. Policies from airports are often more expensive. You can also look for coupons and discounts or book a cheaper economy car.
  • Non-residents visiting Canada may be limited to purchasing rental insurance coverage from their travel agency or signing a CDW.
By Aren Mirzaian

With over a decade in Canada’s insurance sector, Aren is a leading voice in the industry, providing thought leadership on auto insurance, underwriting innovation, and how technology is reshaping insurance.

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