Rental car insurance provides you with coverage in case you’re in an accident in a rental vehicle. Each type of coverage serves its own purpose, whether it’s protecting the rental car, yourself, a third-party, or your personal belongings.
If you’ve ever rented a car, you’ve probably asked yourself, “Is this insurance even necessary? Don’t I already have car insurance anyway?”
Your instincts are correct. You might already have insurance that covers these costs, and if you don’t, you can certainly find some. But you might be surprised at where you can find this type of coverage.
Let’s take a look at the different types of rental car insurance and ways for you to save on each one.
Key Takeaways
- Rental car agencies generally offer 4 insurance coverage types: collision and loss damage waiver, liability insurance, personal accident insurance, and personal effects coverage.
- There are premium credit cards that offer rental car insurance, medical insurance, and occasionally, personal effects coverage.
- Check your personal auto insurance policy to see if it extends coverage to rental vehicles.
Vastly different types of rental car insurance coverage
When you arrive at the car rental counter, you’ll typically be presented with up to 4 types of insurance and coverage you can buy:
- collision and loss damage waiver,
- liability insurance,
- personal accident insurance, and
- personal effects coverage.
Be very careful that you don’t mix these up – people often think they can decline liability insurance because their credit card covers them. That one mistake could easily bankrupt you if tragedy strikes.
Here’s how they differ.
Are you missing important insurance coverage? Make sure you’re covered –here are 4 essential types of insurance in Canada
Rental car insurance: collision and loss damage waiver (CDW & LDW)
Cost: up to $40 per day.
This covers the car you’re renting itself, and nothing else. Having this coverage means that if anything happens to the car – like fire, theft, or accident – the costs will be paid for. This is similar to comprehensive and collision insurance in regular auto policies, only it’s for a rental car.
Rental car companies have now started charging additional fees for:
- lost revenue while the car is being repaired,
- administrative fees for handling the repair,
- towing costs, and
- even depreciation on the resale value of the vehicle for it having been in an accident.
The expensive CDW & LDW policy offered by the rental car company covers these additional fees, but other coverage you have may not, so you need to check.
Rental car liability
Cost: up to $10 per day
Liability insurance covers you for damage and injury you may inflict on other people and their property while driving a rental car. This is where costs can really skyrocket if an accident happens.
If you happen to get sued for medical injury, the lawyer fees and settlement costs could go into the millions of dollars and easily bankrupt you.
You want to make extra sure you have this coverage – paying for a $30,000 car is manageable for most people without complete financial ruin, but there’s no way out of a million dollar judgement against you.
Really, liability insurance is the most likely kind of insurance to be included in your rental. It’s often mandated by provincial or state law and some rental car companies automatically include it as part of their service.
You may also encounter “supplemental” liability insurance (SLI) which is coverage above and beyond the minimums they’re required to provide. Be sure to ask what those minimums are. Chances are good that you don’t need anything supplemental.
Personal accident insurance (PAI) for rental cars
Cost: up to $9 per day
Even if you have liability insurance and you get in an accident, nobody is paying your medical bills or a lump sum payment if a death were to occur.
That’s where PAI comes in. It covers medical costs for you and your passengers and sometimes also includes lump sum accidental death and dismemberment (AD&D) payouts if a death or body part loss occurs.
What is personal effects coverage? (PEC)
Cost: usually bundled with PAI, but can be up to $7 – $8 a day
Personal effects coverage pays for your personal property if it’s lost, damaged, or stolen while you’re travelling with your car rental.
It’s usually bundled as an extra feature of PAI and isn’t something you pay for separately.
Declining rental car insurance
Now that you know what your rental car insurance is covering, it’s important to know what your options are for declining it.
Here’s what to consider when declining each of the following rental car insurance coverages:
- collision and loss damage waiver,
- liability insurance,
- personal accident insurance, and
- personal effects coverage.
Declining CDW & LDW coverage
CDW & LDW is the most expensive coverage and also thankfully the easiest to decline. Here are your options:
1. Use your credit card
The majority of premium credit cards with an annual fee offer rental car collision and loss insurance. Coverage typically tops out at $65,000 and does not cover exotic or luxury cars. If your card offers adequate protection, you can safely decline the CDW or LDW offered by the rental company and save up to $30 daily.
For example, the BMO AIR MILES®† World Elite®* Mastercard®* – the best Air Miles credit card in Canada – offers CDW up to a maximum of $65,000.
$150 GeniusCash + Up to 9,000 bonus AIR MILES + 3x the AIR MILES at partners.*Get up to 9,000 AIR MILES Bonus Miles, and get 3x the Miles for every $12 spent at participating AIR MILES Partners. You'll also earn 2x the miles at grocery stores and wholesale clubs, and 1 mile per $12 spent everywhere else.
- Genius Rating:
- Rewards rate: around 1.11%
- Our credit estimate: Fair (560-660)
- Welcome bonus: up to 9,000 bonus miles* (Ends 2025/12/31)
- Annual fee: $120, 1st year free
- Interest: 21.99% on purchases, 23.99% on cash*
- * See rates and fees
- It'll take you to the bank's secure site.
- You'll get the chance to read the offer and product details.
- If you choose to apply, filling the form should take between 10 to 15 minutes.
GC: $150
- It'll take you to the bank's secure site.
- You'll get the chance to read the offer and product details.
- If you choose to apply, filling the form should take between 10 to 15 minutes.
Credit card insurance policies are often found online with a little digging through your bank’s website. They are also included in the welcome package you received when your card arrived by mail. If all else fails, call the number on the back of the card and ask them to email it to you.
Credit card insurance is always secondary insurance, so if you, your work, or the rental car company has another policy that covers loss and damage, that will kick in first and any remaining amount will be covered by your card’s policy.
To be covered you simply need to charge the full cost of your rental to your credit card.
2. Use your personal auto insurance
Many personal auto insurance policies offer what is known as legal liability for non-owned vehicles. This will cover damage or replacement costs for rental cars and any other vehicle you drive that you don’t own.
These policies often have a set deductible of around $250 that can differ from the deductible on the rest of your policy. If you have both this coverage and credit card coverage, you can feel pretty safe declining CDW & LDW at the rental counter.
Declining liability coverage
Liability insurance is the one you want to be 100% certain you have because, depending on who was injured and what you damaged, costs can easily run into the millions.
1. Use your personal auto insurance
The 3rd party liability coverage you have with your auto policy should also give you liability coverage when renting a car. Whatever your deductible and maximums are for that coverage typically apply if you injure someone or damage property while driving your rental.
There are a couple of gotchas to watch out for…
First, most Canadian policies only provide coverage within Canada and the United States. If you’re travelling further than that, you need to find some other source of liability coverage. Call your insurer before you rent and ask them directly about their global coverage.
Second, a few Canadian provinces like Saskatchewan, Manitoba, and Quebec have “no fault” insurance. Ontario has partial no fault insurance. That means your insurer always covers the risk to you no matter who causes the accident. Third parties must make claims through their own insurers.
If you live in one of those provinces, the liability of other people may not be covered if you are at fault when out of province or country. Your insurer may offer add ons or an umbrella policy to give you better coverage if you need it.
2. Use the rental agency’s free coverage
Depending on the province, state, or country you’re travelling in, there can be laws that require rental agencies to provide a basic minimum amount of liability coverage.
The amount may be lower than you could need in the worst case scenarios, so call and ask them about that before you go. If they provide adequate coverage and your auto insurance policy isn’t in effect, you could still be safe to decline.
Declining personal accident insurance
You want to make sure you and your passengers have emergency medical coverage and income replacement if you’re unable to work due to an accident while renting a vehicle.
1. Use your credit card travel medical coverage
Travel medical coverage is a much rarer credit card feature than CDW & LDW and often applies for a shorter time frame – ranging all the way from 3 to 60 days.
Many premium travel credit cards do offer it though with varying degrees of coverage and maximums. You’ll have to read your policy to see exactly what you have (if you have it at all). If you do have it, it should cover you for any medical emergency you have while travelling, including in a rental vehicle.
Even fewer cards offer lump sum AD&D coverage for rental cars. Most do offer this when travelling on common carriers like airplanes or trains, but rental cars are excluded.
The BMO Ascend™ World Elite™* Mastercard®* is an example of a credit card that will give you a lump sum payment on rental car accidents – up to $200,000 in fact.
$125 GeniusCash + Up to 90,000 100,000 bonus points + 4 free lounge passes per year.*Unforgettable travel experiences start with BMO's premium flexible travel credit card! Get up to 90,000 100,000 bonus points, and earn 5 points per $1 spent on travel, 3 points per $1 spent on dining, entertainment, and recurring bills, and 1 point per $1 spent on all other purchases.
- Genius Rating:
- Rewards rate: around 1.09%
- Our credit estimate: Poor (300-560)
- Welcome bonus: up to 100,000 bonus points* (Ends 2026/01/31)
- Annual fee: $150, 1st year free
- Interest: 21.99% on purchases, 23.99% on cash*
- * See rates and fees
- It'll take you to the bank's secure site.
- You'll get the chance to read the offer and product details.
- If you choose to apply, filling the form should take between 10 to 15 minutes.
GC: $125
- It'll take you to the bank's secure site.
- You'll get the chance to read the offer and product details.
- If you choose to apply, filling the form should take between 10 to 15 minutes.
2. Use your health plan’s travel insurance
Many work or personal health plans come with a travel insurance component that includes emergency medical and other fringe benefits. If you do have this add on, then you’ll be covered when renting a car as well.
3. Use your personal auto insurance
Your personal car insurance policy covers your own injuries in addition to those of others. This is often called Accident Benefits in the policy itself and will pay for:
- medical expenses,
- rehabilitation expenses,
- funeral expenses,
- lump sum death benefits, and
- loss of income payments.
Depending on your province and insurer, these benefits can extend to you when travelling and renting a car. However, generally they’re only applicable inside Canada and the United States.
4. Use medicare from your province
Medicare coverage still typically applies even if you’re travelling out of the country – but the rules on this can vary by province.
You need to be aware that the cost of medical services can be much more expensive in other countries and medicare will typically only cover the normal cost for the same service in your home province. At least one form of supplemental travel medical insurance is recommended.
5. Buy one-time or annual travel insurance
Travel insurance is a big money maker for travel companies and insurers alike. It’s expensive to buy, but buying it in advance might be cheaper than paying at the rental counter.
Think outside the box when looking for this insurance. Even if your credit card doesn’t offer it for free, it often is available as a one-time or yearly add-on to your credit card. If you take a few trips a year, it quickly pays for itself.
Getting free personal effects coverage
If you plan on declining PAI, then you’ll also be declining PEC. Finding this coverage elsewhere can be a bit tricky.
1. See if your credit card covers you
The best option is a credit card that offers either all-encompassing personal effects coverage, which is extremely rare, or getting one that specifically offers rental car personal effects coverage.
Want an example? The MBNA Rewards World Elite® Mastercard® offers rental car personal effects insurance with coverage up to $1,000. It's also one of the most flexible travel credit cards.
$150 GC Boost + Up to 30,000 bonus points + birthday bonus worth up to 15k points.*Earn up to 5 points per $1 spent on purchases, an annual birthday bonus of up to 15,000 points, and a comprehensive insurance package with our #1-rated Mastercard in Canada.
- Genius Rating:
- Rewards rate: around 2.86%
- Our credit estimate: Very Good (725-760)
- Welcome bonus: up to 30,000 bonus points*
- Annual fee: $120
- Interest: 21.99% on purchases, 22.99% on cash*
- * See rates and fees
- It'll take you to the bank's secure site.
- You'll get the chance to read the offer and product details.
- If you choose to apply, filling the form should take between 10 to 15 minutes.
GC: $150
- It'll take you to the bank's secure site.
- You'll get the chance to read the offer and product details.
- If you choose to apply, filling the form should take between 10 to 15 minutes.
Terms and Conditions apply. This offer is only available to residents of Quebec. For residents of other provinces/territories please click here.
2. Use your home or renters insurance policy
A second option is your home or renters insurance policy. Often your personal effects are covered even when travelling but making a claim may not be worth it due to high deductibles and rate increases.
If you happen to lose a lot of high value items, though, it is an avenue you can explore.
Pros and cons of getting rental car insurance
Here’s a quick overview of some of the benefits to buying rental car insurance at the counter, and some downsides of doing so.
Pros
- Convenient and quick.
- You know you’re covered (peace of mind).
- Avoid costs if you’re in an accident.
Cons
- Expensive.
- May already be covered through other means.
- Using other options could save you money.
Chances are you ARE covered by rental car insurance
Most of the time, when you’re at the counter of a car rental agency and wondering whether you already have insurance for this, you probably do.
While navigating through the rental agency’s insurance policies can be a pain, you’ll want to check their details before signing or paying for anything. And before you even head to the rental location, go through the details of your credit card’s insurance package and check your personal auto insurance policy too.
This might take some time, but it can save money.
To make things easier on yourself, carve out some time to go through both your personal auto insurance and your credit card details and make notes of the various coverages you’ve got. Keep this information in a safe, convenient place so you can take it out to refresh your memory before renting a vehicle.
If you’re planning a trip to a foreign country, you might want to call your credit card company or auto insurance provider to make sure that the coverage extends to rental cars in other places.
Do you usually get rental car insurance?
Do you usually pay the premium for rental car insurance at the counter?
Or did you check out your credit cards and other insurance coverages and realized you didn’t need it?
Let us know in the comments below.
FAQ
Is it important to get insurance on a rental car?
Yes, it’s very important to make sure you have insurance on your rental car. Just as your personal auto insurance policy protects you from paying out of pocket for accidents or injuries that occur while driving your own car, rental car insurance protects you when you’re driving these other cars.
How can I get rental car insurance in Canada?
There are several ways to get this kind of insurance. The most obvious way is to purchase it at the rental car dealership where you’re getting your vehicle. You might want to look at less expensive options, such as what’s available through your credit card or your personal car insurance policy.
Does my insurance cover rental cars?
Some personal auto insurance policies do cover certain kinds of rental car insurance. But not all policies offer this, and even if yours does, it might not cover all types of car rental insurance. Be sure to check your individual policy to see if and what types of coverage you have.
Do I already have credit card rental car insurance?
Every credit card is different, so you’ll want to check the details of your own credit card to see whether insurance for car rentals is included. There are different sub-types of this insurance too, so be sure to check that you have the specific coverage you’re looking for.
How can I save money on rental car insurance?
Before purchasing rental car insurance directly from the rental car company, find out whether your personal automobile insurance covers non-owned vehicles and also check if it extends to where you’re travelling, if applicable. Other ways to save include having a credit card that offers rental car insurance and comparing protection plan rates at a few rental companies before booking a reservation.
$75 GeniusCash + Unlimited transactions for $0 + Ding-free non-affiliated ATM usage.
$25 GeniusCash + $50 bonus for funding a new account, and $0 commissions on stocks & ETFs
$12 GeniusCash + Access trusted news coverage 24/7 + Digital and home subscription options.
$25 GeniusCash + Delicious meal choices with fresh ingredients + Front-door delivery.
Leave a comment
Comments