• Fri. Dec 8th, 2023

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Does your car insurance cover a rented vehicle? | Lorraine Explains

Your coverage may extend to a rental car, but might not if the rental costs more than your own vehicle

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A Toronto man recently discovered a nasty — and unfortunately increasingly frequent — surprise: the pickup truck that had just been in his driveway had vanished. The 2022 Ram 1500 Hybrid would be high on a thief’s wishlist; the global lust for high-end North American trucks and SUVs has never been greater. But the headline wasn’t about escalating theft, a topic that has dominated the news (at Driving.ca, we did an entire podcast on the subject last week) for a few years now. It was about the fact the stolen truck hadn’t been properly insured; he’d rented it from a major car rental company. 

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Upon renting the vehicle, the driver assumed his current car insurance would extend to the rented one. He was partially right in that the coverage he had was extended to a vehicle he rented. What he didn’t factor in was that he was inadequately insured and what worked for his previous vehicle wasn’t going to cover him on the fancy rented rig. Now the rental agency is informing him he owes them 50K to make them whole. 

This isn’t a pile-on piece. It’s a reminder that insurance is a complicated transaction we take for granted when we shouldn’t. It’s a lot like driving itself. Everything is fine until it’s not, and when it’s not, the results can be frustrating at best and catastrophic at worst. 

While insurance is mandatory, it is overseen by provincial governments and regulated by entities like the Financial Services Commission in Ontario. Within those rules and wordings and requirements are optional coverages. Decisions you make in one arena can have unexpected consequences in another, as this renter found out. While he had the mandatory liability coverage on his personal policy, he’d opted out of the part of the OAP 1 that says, “you may buy coverage to protect you against loss of, or damage to, your automobile caused by collision, fire, theft and a variety of other unpredictable risks.” Emphasis on “may“.

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It’s not uncommon to remove that coverage with an older car that often wouldn’t be worth fixing. People do it to save money all the time. But when it comes to renting something else, it means you have to take the additional coverage offered by rental outfits. We rent cars for vacations; we rent them to move; we rent them when our personal vehicles are in the shop. “Renting a vehicle to move personal items is automatically covered under the OAP1 but follows the coverage on your policy.  If you have liability only, then physical damage is not covered (collision and comp),” says Debbie Arnold, a broker with Sound Insurance. A good broker is going to advise you to take extra coverage, like OPCF 27 which extends protection to a rented or borrowed vehicle. It’s a few bucks more for a lot of peace of mind.

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The fine print is always a rabbit hole, but if you’re renting a vehicle you need to delve down into at least three of them: your own insurance policy, the insurance offered on the rental contract (check their websites), and the section of your credit card that may pertain to rentals. Lots of expensive mistakes get made. The $4,000 hail damage not paid because the credit card coverage didn’t apply to pickup trucks; the nearly $19,000 damage charged to a customer who rented a Home Depot van and discovered after connecting with a deer that Home Depot doesn’t insure their vehicles — you’re on the hook for anything that happens through your personal insurance. By the way, that deer strike would fall under the optional comprehensive coverage, so you can see how fast someone could be in trouble.

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We’re heading into rental car season for many. With very little exception, Canadian automobile insurance only covers North America.  If you’re renting a vehicle in Mexico or any other country, you have to purchase the insurance offered by the rental company.  If you’re driving into Mexico, you have to purchase insurance for your vehicle at the border!  Your Canadian policy will not cover you there,” says Arnold. Pay very close attention to who is legally allowed to drive your rental, and list anyone who might be. There is a weight restriction on your personal policy of 4,500 kg on rental vehicles, as well. If you’re heading out in many RVs, you need to purchase their insurance. 

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All-in price advertising means Ontario car buyers have a right to know the bottom line. Photo by Getty

If you’re taking advantage of your credit card’s coverage, remember you have to book and pay for the rental with that same card, and credit cards often rule out certain vehicles like pickup trucks and UHauls. They also have time limits and most won’t insure a rental with an MSRP of $85,000 or more — as prices climb, that doesn’t represent as much vehicle as it used to. 

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Arnold notes that the turbulence in the automotive industry over the past three years has changed the recommendations she makes to her clients. “Theft is a huge issue now and because of a lack of inventory, when people go to purchase a replacement vehicle, they may have to wait months.” Most insurance replacement vehicles are for 30 days, which means either added expense or mooching from friends or family.

Adding to the turmoil are the sky-high prices of vehicles. “Even with the loss of a brand new vehicle, whether through theft or total loss due to collision, if the client has OPCF 43 – Limited Waiver of Depreciation – which pays based on the original bill of sale, the replacement may be thousands of dollars more. There is no coverage for this under the auto policy.” Arnold recommends purchasing a product from Optiom that does, or you can ask your dealer about gap insurance. That OPCF 43 used to be like a get-out-of-jail-free card if you had a newish car; no more.

If a rental vehicle is on your radar for any reason, call your broker and ask how to make yourself bulletproof in the eventuality of anything. 

Lorraine Sommerfeld picture

Lorraine Sommerfeld

Sommerfeld has been polishing her skills as an advocate for over 16 years, helping decipher a complicated industry for consumers who just need good information. A two-time AJAC Journalist of the Year, ask her anything – except to do a car review.


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