What you need to know about Rental Car Insurance and Liability

Under Ontario law, every vehicle owner must have insurance coverage to pay for damage they cause to another vehicle or property (‘third party liability’) as well as to pay for accident benefits, uninsured automobile coverage and direct compensation.  However, vehicle owners may choose to opt out of insurance coverage to pay for damage to their own automobile, in which case they would be responsible for paying to fix their own vehicle damage.

In the case of non-owned vehicles (including rental cars), liability insurance is available to you from three  different sources: 1) the auto rental company; 2) your own vehicle insurance and; 3) it may be provided by your credit card company.  It’s a good idea to compare the three options before embarking on your trip and before booking a rental car, to ensure that you have the most economical option and have the level of coverage that you need. 

Your Ontario Vehicle Insurance Policy

Ontario vehicle insurance policies normally provide optional coverage (or an option to buy coverage)  for ‘legal liability for damage to non-owned automobiles’ (called ‘OPCF 27’).   When you have OPCF 27 coverage on your policy, your car insurance company will be responsible for paying for any damage to a vehicle you don’t own, including third-party liability coverage.  

If your vehicle insurance policy doesn’t include OPCF 27, you can add this coverage at a fairly reasonable annual fee, which may be cost-effective depending on your situation.  However, some people may consider it a disadvantage to have to make a claim against their own insurance company for damage to a rental car.

What you need to know if making a claim under OPCF 27

• The auto rental agreement must be in your name or the name of an insured person on your vehicle insurance policy in order to be eligible.
•  OPCF 27 applies to vehicle rentals in Canada or the United States only.  If you’re renting a car in Europe or elsewhere, you will need to obtain other coverage.
• There is typically a limit for damage (often $50,000), but your policy may provide an option to purchase more insurance if you need it.
• Automobiles weighing more than 4500 kgs are not covered
• Coverage is limited to a period of 30 consecutive days

Insurance coverage provided by the automobile rental company

Vehicle rental companies typically offer ‘collision damage waiver’ or ‘loss damage waiver’ insurance which will cover some of the damage to the rental vehicle.  With this coverage, if you damage the vehicle you rented, the rental company is responsible for paying the cost of damage.  However, be advised that there may be exclusions on this policy, so you need to carefully read the rental insurance agreement so that you don’t unknowingly do something that voids your insurance.  For example, many agreements state that you are not protected if you drive on unpaved roads.

In Ontario, $200,000 is the minimum third-party liability coverage legally required for vehicle rental companies, but most car rental companies in this province provide $1 Million or more in third-party liability coverage.  However, rental companies elsewhere may provide only a low amount of coverage on their basic agreement.  In many American states, for example, auto rental companies are required to provide mandatory minimum liability coverage as low as $15000-$25,000, which likely would not cover lawyer fees in the event of a personal injury lawsuit in the U.S.   So, you’re well advised to purchase additional third-party liability coverage if you are renting in these jurisdictions.

Your Credit Card may provide Rental Car Coverage

Many credit cards provide collision damage coverage for rented vehicles.  However, the credit card may require you to pay the full cost of the vehicle rental with the given card in order to be eligible for coverage. And, you must decline the vehicle rental company’s collision damage waiver.

Your credit card may have other conditions for rental car coverage as well.  For example, they may only provide coverage for approved auto rental companies.  So, be sure to check out the terms, deductibles and limitations under your credit card so that you don’t face a costly surprise down the road.

Finally, if you don’t have collision damage insurance from any of these options, you will be responsible for any damage and costs you caused while the rental car is under agreement.