There is a downside to rental car insurance

Published: September 18, 2015

Updated: May 15, 2018

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You have probably heard the horror stories about rental car insurance, the coverage provided to you by the company that you lease the vehicle from. While you may leave the office thinking you’re sorted out if anything goes wrong, that is so very often not the case, and indeed it goes something like this:

“Please use our rental company again, but because you hit that tree you owe us $5,000.”

To which you may fall apart thinking, “What about my rental coverage”?

Does that mean you should avoid getting the baked insurance offered by your rental car company? Not exactly, but it does mean you should be careful and think about your choices. We have a guide regarding all things rental car insurance that will tell you the pros and cons, but let’s take some time in this guide to look at the downside to rental car insurance.

“The customer is usually responsible for the full value of the rented automobile regardless of fault,” says Craig Hirota, Member Services Manager with the Association of Canadian Car Rental Operators (ACCRO) in an email. “Plus additional costs such as loss of use, administrative fees, diminishment of value, tow and storage fees, etc.”

That is significant because it means beyond the basic insurance coverage afforded you by law, you are responsible. In Ontario and indeed much of Canada you are entitled to a minimum $200,000 third party liability that all insurers much provide by law. That means you are covered up to $200,000 should you be at fault for causing an accident, injury, death, or property damage… including to the rental car.

If you are from the United States or Canada itself, there are a number of ways you can avoid taking the added rental car insurance (which is optional and does not need to be added to your rental agreement). Your regular car insurance policy, if you have one, could and probably will cover you when you rent a car; this may be automatic, but it is best to contact your provider to be clear. Some credit cards come with rental car insurance coverage, but you will need to pay for the rental with your plastic and again should check with your credit provider to see if they offer this.

If you are coming from further afield, like Europe, you may find it a little tougher to get coverage beyond that offered by the state and the rental company.

“Typically, personal auto policies from Europe may not transfer to a rental vehicle — therefore, any damage or loss of the rental vehicle is the customer’s responsibility.” says Lisa A. Martini, spokesperson for Enterprise Holdings, which owns National, Enterprise and Alamo. “The European renter is protected for damages or injuries caused to someone else or someone else’s property at a minimum of $200,000 per occurrence.”

There are travel insurance policies that cover car rental and could give you more coverage than the basic policy offered by the rental car company. You will notice we have said this a lot, but you really should check with your travel insurance provider to see if this is the case. Many do offer this, but we cannot speak for individual companies.