Loss of Use − The Coverage You Thought Was Standard

If you’ve ever been in a car accident involving extensive repair, or even a full replacement, you might wonder if your auto insurance policy covers the cost of a rental car while you wait. The answer actually depends on one factor: whether you have loss of use coverage or not. 

What is loss of use coverage?

Loss of use coverage, or temporary vehicle replacement, is an optional add-on to your auto insurance policy. If your vehicle needs replacement or repair due to damage, a loss of use policy will cover your cost of transportation while you wait whether you choose to rent a car, take public transit, or call a cab.

In Canada, there are three common types of loss of use forms, depending on your location:

• OPCF 20 (Ontario Policy Change Form) for drivers in Ontario
• QEF 20 (Quebec Endorsement Form) for drivers in Quebec
• SEF 20 (Standard Endorsement Form) for drivers in Alberta and Atlantic Canada

How much does loss of use coverage cost?

Typically, loss of use coverage will cost you about $60 to $80 annually, but this number can vary depending on factors such as bundles and discounts. Speak to your auto insurance broker for an accurate number that best suits your situation. 

How do I qualify for loss of use coverage?

Loss of use coverage is an enhancement that applies if you already have specified perils coverage, collision coverage, comprehensive coverage, and/or all perils coverage. 

• Specified perils coverage pays for losses caused by risks, such as theft, fire, earthquakes, explosions, and weather.
• Collision coverage pays for losses caused by at-fault collision with another vehicle or a grounded object. 
• Comprehensive coverage pays for losses that aren’t caused by a collision, including those under specified perils, falling objects, and vandalism. 
• All perils coverage provides a combined package of comprehensive and collision coverage to compensate losses caused by any peril unless otherwise stated in your policy. It also pays for losses if someone you live with, a driving employee, or an auto mechanic damages or steals your vehicle. 

You don’t need every type of coverage to purchase a loss of use policy, but your loss of use coverage is limited to the factors you are insured for. For instance, if you only have collision coverage and your car gets stolen, you can’t claim loss of use coverage for a rental car because that falls under comprehensive, specified perils, or all perils coverage. 

How long does a loss of use coverage apply?

Generally, your auto insurance company will stop providing loss of use coverage after the first of three events: your damaged vehicle has been repaired, you received a total loss settlement, or your coverage limit has been reached. 

Your coverage limit is dependent on your insurance plan, and each auto insurance company will offer a different limit depending on what you pay for. For example, your plan might provide you with a maximum of $900, so be sure to check your policy or speak with your insurance broker to understand how the loss of use coverage works for you. 

What are the limits of loss of use coverage? 

There are a few limitations with a loss of use coverage endorsement. Firstly, your replacement vehicle will need to be similar in size to your damaged vehicle. You won’t be able to rent out a sports car if you’re driving a minivan. 

Secondly, if you’re under 21, most rental car companies will not be able to rent you a vehicle due to their age restrictions. In this case, the loss of use coverage can still compensate for the cost of cab fare or public transit. 

Lastly, a loss of use coverage plan typically doesn’t cover gas or any additional rental car insurance. There could still be extra costs required for your temporary vehicle, despite the rental cost being covered.

What are some other common endorsements for auto insurance?

Besides the loss of use coverage (OPCF 20, QEF20, SEF20) endorsement, there are other car insurance endorsements that you can add to your auto insurance plan for increased protection. In Ontario, common endorsements to add along with your loss of use coverage include OPCF 24 (liability for damage to non-owned automobiles) and OPCF 43 (removing depreciation deduction). 

• OPCF 24 (liability for damage to non-owned automobiles) provides collision and comprehensive coverage in the event you’re driving a car that isn’t your own, and it gets damaged. This includes any borrowed automobile, whether you’re using a rental vehicle or a family member or friend’s car. 
• OPCF 43 (removing depreciation deduction) eliminates the deducted depreciation on your vehicle if it needs to be paid out. Automobiles lose value at a rapid pace, but having this endorsement will provide you with a replacement vehicle of the same original value if your car gets stolen or is deemed a total loss. This policy is only available for brand new vehicles and generally lasts up to two years.  

The bottom line

Loss of use coverage is an optional endorsement to cover the cost of your temporary vehicle or transportation. Accidents happen, and if your car needs a week in the repair shop, having a loss of use coverage policy can alleviate your worries in covering the price of your rental car. However, not everyone needs loss of use coverage. If you can go without a car for a week because you live near public transit, walk to the store, or bike to work, it probably isn’t worth the investment.  Speak with your auto insurance broker for more details on loss of use coverage for your car insurance policy. And above all, compare car insurance quotes to make sure you're getting the best rate today.

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