Accidents happen, and if you rely on your car every day, you might wonder if your car insurance covers you for alternative means of transportation (such as car rental, public transit, or a taxi) should something happen to your vehicle. Car insurance requirements vary by province and territory, so review your policy to determine if you have coverage for alternative means of transportation in the event of loss of use to your car.
If needed, you can purchase optional coverages for more protection. Purchasing additional coverage for loss of use (also known as coverage for transportation replacement) can help keep you moving while your car is being repaired in the event of a covered claim.
Key takeaways
- Loss of use coverage is an optional add-on to your car insurance that helps cover the cost of alternative transportation (e.g., rental cars, public transit, taxis) while your vehicle is being repaired after a covered claim
- This coverage varies by policy. Review your policy to understand your limits and ensure you have enough coverage for your transportation needs during repairs.
- Loss of use coverage is an affordable and practical investment that can prevent significant out-of-pocket expenses for alternative transportation during vehicle repairs.
What is loss of use coverage in car insurance?
If your vehicle is damaged in an accident, you might be unable to drive it while it's being repaired. You may be left searching for transportation and facing unplanned expenses, which is where loss of use coverage comes in. This optional car insurance coverage helps cover the cost of a rental vehicle, public transit, or other alternative transportation while your damaged vehicle undergoes repairs from a covered claim.
How does loss of use coverage work?
When you have loss of use coverage, your insurance company will reimburse you for transportation costs if your vehicle undergoes repairs after a covered claim. This means you won't have to pay out of pocket for a rental car, taxi fares or public transportation while waiting for your vehicle to be fixed. Your coverage amount depends on your car insurance policy. Some policies have a daily limit, while others provide a lump sum for rental costs.
Here's how it works:
- Your claim is approved: Your auto insurance provider confirms your vehicle is being repaired due to a covered claim.
- You arrange transportation: You can use a rental car agency, public transit, rideshare services, or taxis.
- Your insurer reimburses you: Your insurance policy will cover costs up to your coverage limit.
Is loss of use coverage included in standard car insurance?
Loss of use coverage is typically an optional add-on rather than standard in most car insurance policies. It's often recommended with comprehensive or collision insurance. If your policy includes collision coverage or comprehensive coverage, you may already have some level of additional protection for rental vehicles. Loss of use will apply if you are not-at-fault but is required as an optional coverage when claiming comprehensive or collision insurance.
What does loss of use coverage pay for?
If your damaged vehicle is being repaired after a covered claim, loss of use coverage can help with the following:
- Rental cars from approved rental companies
- Public transit costs (buses, trains, etc.)
- Taxi fares or rideshare services
- Alternate transportation like car-sharing programs
This coverage applies until your coverage limit is reached or your vehicle repairs are completed, whichever comes first.
Tips and limitations to loss of use car insurance coverage
When buying additional coverage for loss of use, you can choose the amount you want. This is the amount the insurance will pay up to for the cost of a rental, public transportation, or taxi in the event of a covered claim. It's important to have enough coverage for your needs.
Let's say renting an SUV in Canada costs an average of $100 per day, plus tax. An insurance policy with a $1,000 coverage amount for loss of use will cover rental costs for about 8 days. With costs of alternative means of transportation rising and possible delays with repairs, it's important to connect with your insurance representative to ensure you have enough coverage to help with these expenses for extended periods should something happen.
Things to consider when selecting your coverage amount
- Type of vehicle you own (year, make, model)
- Should something happen to your primary vehicle, do you have another car to drive?
- Do you rely on your primary vehicle for daily activities such as work, childcare, errands, etc.?
- Exchange rates will apply if the vehicle is rented in the United States while you're travelling (your coverage amounts are in Canadian dollars)
Real-life scenarios: When loss of use coverage matters
To illustrate the importance of loss of use coverage, here are two real-life scenarios where it made a significant difference for individuals facing unexpected vehicle repairs.
Scenario 1: Winter commuter
Julie lives in Edmonton and commutes 30km to work each day. After a winter storm, her car was damaged in a multi-vehicle incident and needed two weeks for repairs. Without loss of use coverage, she would have paid over $1,400 for a rental car.
Scenario 2: Family vacation situation
The Chen family was on a summer road trip to Banff when a falling tree branch damaged their minivan. With repairs estimated to take 10 days, their loss of use coverage allowed them to continue their vacation with a comparable rental, saving them approximately $1,200 in unplanned expenses.
How much does loss of use coverage cost?
The coverage cost for loss of use varies depending on factors like your insurance company, province, and policy details. Generally, it's an affordable optional add-on that can save you from paying out-of-pocket for transportation replacement while your car is in the shop.
In most Canadian provinces, adding loss of use coverage typically costs between $20 and $50 annually for coverage limits between $900 and $1,500. Considering that rental car costs in major Canadian cities often exceed $75-$100 per day, this coverage can quickly pay for itself after just a few days of vehicle repairs.
Note: Additional coverage may affect your premiums. To learn about potential reasons why your insurance rate may increase, check out our article: Why did my car insurance go up?
Loss of use vs. other types of coverage
Loss of use coverage is often confused with other auto insurance options. Each type of coverage serves a different purpose, and it's important to understand their differences when selecting a policy.
Loss of use vs. liability for damage to non-owned automobiles
Loss of use helps cover the costs of temporary vehicle replacement (such as a car rental, public transportation, or taxi) while your vehicle is being repaired due to a covered claim. If you decide on a rental, loss of use would usually reimburse you for renting a similar car to the one you own.
Liability for damage to non-owned automobiles provides coverage for loss or damage if you drive a vehicle you don't own. For example, if you occasionally rent cars to drive around town or while on vacation in Canada or the Continental United States, including Hawaii and Alaska, this optional add-on coverage might be right for you.
Other related coverages
Rental car coverage is designed to protect you while driving a rental vehicle. It does not cover transportation costs when your vehicle is in the shop but provides financial protection if the rental car is damaged during the rental period.
Comprehensive and collision insurance provides financial protection for repairs to your car if it's damaged in an incident or by non-collision events. Collision insurance covers at-fault accidents while comprehensive insurance covers non-collision events such as fire, theft or vandalism. While these coverages pay for repairs to your vehicle, they do not cover transportation costs while your car is in the shop.
Roadside assistance is a service that helps drivers deal with unexpected issues on the road. To learn how it can benefit you, check out our article: What does roadside assistance cover?
How to file a loss of use claim
If your vehicle has been damaged in a covered incident, here's how to file a loss of use claim:
- Report the incident: File an insurance claim as soon as possible after the incident or damage occurs.
- Discuss transportation options: Ask your adjuster about your loss of use coverage and confirm your daily and total limits.
- Keep all receipts: Maintain records of all transportation expenses.
- Submit your expenses: Provide all documentation to your insurance company for reimbursement.
- Follow up: If repairs take longer than expected, communicate with your adjuster about extending your coverage period.
It usually takes one to two weeks for most Canadian insurers to process loss of use reimbursements after you’ve submitted complete documentation.
Do you need loss of use coverage?
Adding loss of use coverage to your car insurance policy can provide peace of mind, especially if you rely on your car for daily commutes. You may want to consider this optional add-on if:
- You don't have a second vehicle to use if yours is being repaired.
- You don't want to pay out of pocket for rental costs.
- You need reliable transportation replacement to continue your routine.
If you already have access to alternative transportation, this coverage type may not be necessary. However, it's a small investment for many vehicle owners that prevents unplanned expenses.
How to add loss of use coverage to your car insurance policy
If you want to include loss of use coverage in your auto insurance policy, follow these steps:
- Review your current coverage: Check if your policy includes optional coverages like loss of use.
- Speak with an insurance representative: They can help you understand how your coverage applies and any potential additional costs.
By adding additional protection like loss of use coverage, you can ensure you're financially covered if you need a replacement vehicle after a car incident.
Car insurance coverage isn’t one-size-fits-all. Your coverage needs may be different from someone else’s. Speak with your insurance representative to see which optional coverages are right for you.
