I was sitting in my office the other day, when the phone rang.A friend and client wanted to know if his policy covered him for driving a rental car.I chuckled, and he said what’s so funny. Half laughing I replied that this is a question that the office gets so often, that maybe we should charge just to answer it. Once the laughter subsided, I looked up his policy and replied that he did not have the SEF 27 Endorsement, so no he would not be covered.

He sheepishly replied that he thought his auto insurance policy automatically covered him, again I replied “no, not unless you have the SEF 27.”There was pause on the phone and then he said, “Oh my god, I have been driving rental cars for years without insurance.” It was then my time to shine, and told him he was not the only person, and he most likely had insurance (or partial insurance) depending upon where he was renting.Finally I said I can add the SEF 27 to your policy for less than $50 a year.  He immediately told me to add the SEF 27 but wanted me to explain why I thought he was probably insured.

First and foremost, in Canada especially, the liability insurance is attached to the vehicle. It is automatic, regardless if you buy the collision coverage.The rental company would not be able to get the car/truck/van on the road, if they did not have liability coverage.  Secondly I said, you most likely rented your car with a credit card, and a lot of credit cards have insurance coverage as a frill while renting a car. That said there are some cases where certain types of rental vehicles might not have liability automatically included in the rental agreement.

As soon as I mentioned the credit card coverage you could sense he was relieved, but then came the next question; why do I need an SEF 27, if my credit card automatically insures me?  It was a reasonable question so I figured, I needed go into a lot more detail.

Automobile Rental Insurance Via Credit Card

While doing some research on Credit Card Rental Insurance I came upon this news story from the Globe and Mail.  It highlights the benefits of the credit card insurance, but also points out the limitations.

Typically if your credit card offers some coverage, there is a lot of fine print that you should be aware of.  Such things include:

  1. Who is allowed drive the car (most times only you and your spouse)
  2. Certain vehicles are excluded.
  3. Limits on the value of a rental vehicle.
  4. You may be required to pay the damages yourself and then settle with the credit cards insurance company.
  5. It only covers physical damage – collision/comp


Rental Companies – Collision Waivers

This is the high pressure sell that you get at the counter when you go to pick up your car.  They offer you a collision waiver, question whether your credit card does actually cover you, or if you have coverage on your personal policy.  They want to sell this coverage to you.  If you are still a bit figidity about if you are covered or not, you can buy the coverage from the rental company.It typically cost about $20 a day.  At that cost it’s a no brainer to add the SEF 27 to your policy.It saves a lot of hassle, cost etc. Especially if you rent a few times a year.

SEF 27 – What is it ?

An SEF 27 is an endorsement to your automobile insurance policy that provides legal liability for damage to non-owned automobile. This covers the liability for loss of or damage to an automobile not owned or licensed in the name of the policyholder but which is in the care, custody or control of the insured, the spouse or named person.If you did have a claim under public liability and property damage (PLPD) and the rental car liability was exhausted then your personal liability could be brought into play. Your personal liability policy is secondary to the primary coverage carried by the rental car company.

What’s the Catch?

The SEF 27 is only good for similar coverages.  What that means is if you want the SEF 27 to cover collision and comprehensive on the rental car you need to have the same coverage on your own auto policy. For me at the same time, I would be looking to make sure my auto insurance policy has at the minimum $1 million dollars in third party liability.  It is hard to know the minimum limits every where you go, so its important to have good liability coverage.

What Should I Do?

In my mind there is no way I would ever pay a rental company for insurance.  I know there are cheaper and better ways to get the coverage I require. I told my friend if it was me, I would add the SEF 27 and rent with the credit card. It will provide you with the broadest coverage and protection.  I would speak to the credit card company to understand any limitations and/or exclusions.I would read my endorsement as well and ask any pertinent questions.

Assuming I meet the requirements I would use the credit card insurance for physical damage first, as it would likely not show up in my insurance history and then my fall back would be my own SEF 27.  Unfortunately any claim on your own policy will count on your insurance record.  The credit card insurance is a freebie and the SEF 27 is a better deal than the rental companies insurance.

Your Newfoundland & Labrador Auto Insurance Experts

So here is the obligatory sales pitch!  The world is hectic and there are so many nuances, it is time to trust your Newfoundland and Labrador Auto Insurance experts at Crosbie Job.  Take a few minutes for us to review your policy, let us help make sure that you are covered when you rent a car.

You can Sleep Easy Because We’ve Got You Covered.  Give us a shout @ 709-726-5414 or 1-800-563-7788 or drop us an email [email protected].