Car insurance may seem like just another opportunity for your car rental company to charge you an unnecessary fee. But the truth is that car insurance does serve an important purpose: it protects you from risk. So do you need insurance for a rental car?
Let’s start by breaking down the types of risks you may be exposed to with your rental car:
- Liability - Damage to someone else’s car, property, or body caused by an accident that was your fault
- Collision - Damage to your own car (in this case, the rental car)
- Comprehensive - Vehicle theft or damage that is not caused by typical driving activities (for example, fire, hail, or other natural disasters)
As you can imagine, each of these risks can be very costly. For collision and comprehensive risks, you may have to pay as much as the total value of the car because you’d be responsible for repairing or even replacing it. And if you think that’s risky, note that liability losses can be exponentially higher. If the person you hit has a serious injury, you could be sued for lots of money. Given these costs, it’s very important to protect yourself against all three risks.
What if I already have car insurance?
But what if you already have protection for one or more of these risks? Do you need to pay an insurance company up to $35/day for coverage you already have? No—you’re on vacation and need to save money for all of the overpriced tourist attractions your partner absolutely has to visit. That’s why it’s important to know what coverage you already have in place.
Under Canadian law, anyone who drives a car must have a minimum amount of liability coverage (at least $200,000–$500,000 depending on the province). So if you have your own car insurance policy, you already have liability coverage. And most policies allow your liability coverage to extend to any car you drive, including rental cars.
However, the game changes when it comes to collision and comprehensive coverage.
Your current policy probably doesn’t give you enough protection. Even if your policy has collision and comprehensive coverage (which almost all policies do), these typically cover a single vehicle only and don’t extend to rental cars.
The good news is that even if your policy doesn’t protect you, your credit card company might. (Yes, credit cards may actually be good for something other than making it way too easy to shop online unnecessarily and rack up debt). Most credit cards, especially ones with annual fees, provide collision and comprehensive coverage for rental cars. There’s just one small catch: you’ll probably have to use your credit card to pay for the entire cost of the rental car. There has to be something in it for them, right?
You’re probably already covered
So there you have it. You’re probably already covered and don’t even know it! Read your credit card benefits and car insurance policy details (or call the companies directly) to find out if and how your coverage applies to rental cars. If you do have the protection you need, you’ll have an extra $35/day to spend on tacky souvenirs and overpriced food. (At least you won’t be giving it to your car rental company.)