Car rental insurance or your auto insurance?

If you are renting a car and you already have the car rental extension (SEF 27) on your current auto policy, you can choose whether to go with the rental company insurance or your own. So how do you decide?

Your auto insurance is only valid in Canada and the US.

If you are renting in Canada or the US, your non-owned auto endorsement will extend your existing auto insurance coverage to a vehicle you rent that is similar (compact, sedan, SUV, truck) to your current vehicle. Consider the amount of coverage you currently carry as well as your current deductible when evaluating whether or not you should waive the rental insurance.

Here’s a quick example:

Dana C has car insurance with RSA. Her policy includes: 1,000,000 Third Party Liability, Collision and Comprehensive (both with $500 deductibles). Dana has added the SEF 27 – Legal Liability for Damage to Non-Owned Automobile. This endorsement shows a limit of $50,000 and a deductible of $250.

Dana is wondering if she should waive the rental fee from the car rental company. Before she decides she should:

• Make sure that she is the named insured on her policy (not just a driver)
• Choose a vehicle type within a similar make/model/value to what she already has
• Determine if the cost of the rental insurance is less than her current deductible

Dana goes to Budget Canada to rent a car. Their Loss and Damage Waiver on a compact car is $28.95/Day. This means that unless Dana is renting the car for more than 8 days, the cost of rental insurance is less than what she would pay with her deductible in the event of a loss. ($28.95 times 9 days=$260.55)

Since she only needs to rent the car for the weekend, it makes the most sense for Dana to pay the rental company insurance.

That is just one example to demonstrate how you (as the insured) need to do the math before you decide if using the rental insurance or your own coverage is the better option.

Now, if you’re renting a vehicle in the US – DON’T FORGET THE EXCHANGE RATE ON YOUR ENDORSEMENT LIMIT! In the example above, Dana’s endorsement limit was $50,000 but that is in Canadian Dollars. Knowing this, instead of renting an equivalent vehicle to her own, she’d choose to rent a lesser vehicle to ensure she had enough coverage.

There is one other thing to consider before you waive the rental company insurance and that’s your at-fault accident record.

What happens when you choose to waive the rental car company insurance because you have SEF 27, and you get into an at-fault accident? You will have to file a claim through your insurance for the rental vehicle. As you know, all accident claims made through insurance affect your future rates. Many insurance companies offer one (and only one) claim before you are penalized. So if you use your insurance for your rental car and get into an at-fault accident, you’re using your one-and-only penalty-free claim on something you don’t even own. If you’ve already used your one free claim, and find yourself at-fault while in a rental car, you’ll be negatively affecting your auto insurance rate for between 6 to 8 years. Plus you’ll have to be more involved in the claims process until it is settled.

On the other hand, if you pay for the rental company’s insurance package and get into an at-fault accident, you just need to contact the rental company. They’ll give you a different car and you just walk (or drive) away knowing they’ll handle everything and your insurance won’t be affected at all.

Adding the SEF 27 to your auto policy is a great idea – especially if you’re renting vehicles often or for long periods of time and you’ve got a great driving record. Just remember to double check your coverage limits and deductibles before waiving the insurance offered by your rental company.

Have more questions about your insurance? We’d love to help.