What is loss of use coverage?
Loss of use coverage, also known as temporary vehicle replacement or rental coverage, will provide coverage in the event your vehicle needs to be replaced or repaired following damage or loss. More specifically, loss of use coverage will temporarily pay for the cost of transportation while you’re without your vehicle until your claim is settled – these transportation costs like public transit, taxis, or hiring a rental car.
How is coverage determined?
When involved in a loss, loss of use coverage will offer a rental that’s typically of comparable size and quality to your vehicle, dependent on availability at the rental location (some locations may not have access to luxury vehicles or particular classes of vehicles). For example, if you drive a Toyota Camry, your claims adjuster will try to get you into a rental that is most similar in size and quality to a Toyota Camry using what availability your local rental agency has.
On average, a rental vehicle can cost the following based on your type of vehicle. It’s important to note that cost may also vary depending on location. A rental in Toronto will cost more than a rental in Waterloo (please note that the below are approximate values).
Standard Sedan (i.e., Kia Forte, Nissan Versa) – $80 to $120 a day
Standard SUV (i.e., Ford Edge, Toyota Rav4) – $150 to $200 a day
Standard Pickup Truck (i.e., Chevy Silverado, Ford F150) – $150 to $200 a day
These costs get even higher if you drive a luxury or high-end vehicle and prefer to receive a rental of that quality. For example:
Luxury sedan (i.e., Mercedes A220, BMW 3 Series) – $140 to $180 a day
Luxury SUV (i.e., Dodge Durango, Chevy Suburban) – $180 to $250 a day
Due to continual supply chain issues, it can be expected that claims are taking longer than usual as it takes longer for parts to come in to complete repairs. If a vehicle is in for repairs, this means that there’s a longer time that you will be in a rental. If the accident makes your vehicle undrivable, this time frame could be longer since you cannot drive your existing vehicle until the parts are ready to repair the vehicle. Using the above-average prices for a standard sedan, if someone needs a rental and has a $1,500 limit, they will only be covered for about two weeks, and even less for a higher vehicle class. After this period, you would be responsible for additional costs for the rental out of pocket as the coverage limit would be met.
Coverage should be tailored to best suit your lifestyle and needs. Whenever there’s only one vehicle on a policy, it’s highly recommended that there’s rental coverage added to a policy. This will ensure minimal impact on your daily life and habits as you will have a replacement vehicle while your damaged vehicle is being repaired.
Even if you have more than one vehicle on your policy or at home, it’s essential to consider how losing one vehicle for an undetermined amount of time can impact your life. If both vehicles are used to commute, or you and a partner have frequent schedule conflicts that require two vehicles, rental coverage should be added to your policy.
Currently, the OTIP minimum suggested coverage is $1,500 for carriers offering a dollar limit on the coverage. In some cases, carriers now offer a ‘daily’ limit instead of a dollar amount, where OTIP’s minimum suggested coverage is 30 days. Regardless of the minimum coverage provided, it’s important to consider the above factors when reviewing and determining if your coverage is appropriate.
If you're a current OTIP policyholder, contact us at 1-833-615-9329 to review your existing car insurance policy and discuss additional coverage. If you’re not insured with OTIP and are shopping for car insurance, call us at 1-833-494-0085 to get a quote and receive a $20 gift card of your choice!