What is Rental Car Insurance?

Rental car insurance usually refers to coverage for theft or damage to the rental car itself rather than coverage for liability, as rental agencies must carry at least the legally required minimum third-party liability coverage on their rental vehicles.   

In practice, this theft or damage protection can come from your own insurance policy, from your credit card benefits, or from coverage you buy directly from the car rental agency. But, while you may already have some coverage under your own policy or through your credit card, this doesn't necessarily mean you'll have adequate protection for your specific rental situation. Details and conditions such as driver eligibility, length of the rental period, vehicle type and value, and where you're travelling can often result in coverage gaps. That's why purchasing the rental agency's coverage is often the safer call in many situations.  

In this article we'll walk you through how rental car coverage typically works for each source of coverage, plus we'll break down some common rental situations to help you better decide whether or not to purchase rental car coverage directly from the rental agency.

While it's not mandatory in Canada to have coverage for damage or theft when renting a vehicle, it's still  strongly recommended: Having the right coverage in place may help protect you financially if your rental vehicle is damaged, stolen, or involved in an accident.  

Rental car coverage can come from: 

• Your own car policy 
• Your credit card benefits 
• Coverage purchased from the car rental agency 

If you already have some rental car protection, either through your own car insurance or as a credit card benefit, the key question is whether you should purchase additional coverage from the car rental agency.   

The challenge? Limits, exclusions, and even the vehicles eligible for coverage can vary, depending on whether the coverage comes from your car policy, a credit card, or the rental agency. So, before you pick up your rental, it's a good idea to contact your insurer or the credit card company to clarify what's covered under the rental car coverage they provide, what's not covered, and whether any gaps in coverage exist. This information will help you decide whether purchasing additional coverage from the rental agency when you pick up your rental car makes sense for your situation.

While standard car insurance policies generally don't provide coverage for rental cars specifically, all provinces and territories require vehicle owners to have at least minimum third-party liability coverage on their vehicles—and that includes the rental agency, which must have the legally required minimum coverage on the rental vehicle you're driving. This type of coverage helps protect you if you're the at-fault driver and you injure someone or damage their property. 

But if you have your own auto policy, your policy will also have at least mandatory minimum liability coverage. How this liability coverage might or might not apply, in addition to the liability coverage already on the rental vehicle, will depend on your policy wording, your province or territory, the province or territory you're renting the vehicle in, and the specific rental car arrangement. For example, in Ontario, if you have your own auto insurance, the liability coverage under that policy will usually come into play before the mandatory liability coverage on the rental vehicle.

But liability coverage doesn't protect against damage or theft of a rental car.  One way to  help fill this coverage gap is by adding a non-owned vehicle endorsement to your auto policy, which would include coverage for physical damage to a rental car.

And some insurers offer optional coverage options that provide coverage for rental cars specifically. For example, if you're a TD Insurance car insurance customer, you may be eligible to purchase our Grand Touring Solution® add-on. With this coverage added onto your policy, you'd be insured against loss or damage to a rental car, up to a $100,000 limit.

Talk to a licenced TD Insurance advisor to learn more about adding the Grand Touring Solution® to your TD Insurance car policy.

Are you planning to rent a car while travelling outside of Canada and the US? If you're a TD Insurance home insurance customer, you can add our  Personal Umbrella Endorsement to your policy. With this endorsement, you'd have both third-party liability coverage and coverage for damage to a rental car (under certain conditions and up to coverage limits). These coverages apply even when you're outside of Canada, so it can be particularly helpful if, for example, you're travelling in Europe and plan to rent a car while you're there.

Many credit cards provide some rental car coverage as a cardholder benefit. While this protection typically includes coverage for theft of or damage to the rental car, it's important to keep in mind you'll only be covered if specific conditions are met. These conditions vary depending on the card, and can include requirements such as using the card to pay for the car rental, declining the rental agency's coverage, and following the card issuer's rental car guidelines. 

Also, the coverage is usually subject to certain exclusions—for example, certain types or classes of vehicles or specific rental situations may be excluded—and limits, such as a maximum replacement value. 

Since rental car coverage can vary widely by card issuer and card type, it's important to review the terms of your cardholder agreement or confirm the coverage details directly with your credit card company, so you can better decide if you can rely on this coverage for your specific rental situation.

While the coverage options available will depend on the rental agency you're renting your car from, these are the four main types of rental car coverages that can be typically purchased from car rental companies:

• Collision or loss damage coverage. Car rental agencies often use the terms collision damage waiver (CDW) and loss damage waiver (LDW) for this type of coverage, which offers protection for physical damage and theft of the rental car. This is the type of coverage most people are thinking of when they're considering purchasing coverage from a car rental agency.
• Liability coverage. In addition to the mandatory, minimum amount of third-party liability coverage that car rental agencies are required to have on their rental vehicles, some agencies may also offer additional liability protection you can purchase to increase this minimum amount of coverage. 
• Personal accident insurance. This type of insurance gives you limited coverage for medical expenses or accidental death. 
• Personal effects coverage. This coverage applies to the theft of personal belongings from the rental vehicle. 

In many cases, buying rental car insurance from the rental agency can be the simplest and most dependable way to avoid an unpleasant financial surprise if something goes wrong. It's a decision that usually comes down to a handful of practical details, including:

• Your existing coverage situation
• The type and value of the rental vehicle 
• The purpose of your rental 
• Where you'll be driving the rental
• Who will be driving the rental
• How long you'll be renting 
• Where you'll be parking and other risk factors 
• Your trip's tolerance for delays and hassles 

* These scenarios are hypothetical and provided for informational purposes only to highlight general considerations related to rental agencies' collision/loss damage coverage options. Your coverage needs depend on your specific circumstances and the terms, conditions, limitations and exclusions under your car insurance policy or credit card benefits. For advice for your situation, contact the rental agency and/or your insurer.

Rental car coverage from a rental agency is usually priced as optional add-ons that are charged per day, so your total cost will depend on how many days you're renting. This per-day cost will also vary depending on the rental company, the location you're picking up the car from, the type or class of the rental vehicle, and even how busy that location is during your rental period. 

For budgeting purposes, if you generate a reservation quote on the rental agency's website using your rental dates and preferred rental vehicle, the quote will typically show the per-day cost for optional coverage add-ons. 

Review your policy details through MyInsurance or the TD Insurance app at any time. And if you’d like to update your policy to include rental car coverage and more, you can manage your policy online, or contact us to help adjust your coverage.

Looking to purchase car insurance? Get a quote online in minutes.