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ask joanne

I rent a fair number of cars every year. I never use the car rental insurance as I am covered by my policy to drive cars other than my own. Rental contracts often only allow secondary drivers if they are declared ahead of time and if they are older than 25. If I use my own insurance to protect the car and its drivers/passengers, am I obliged to follow those restrictions? Worded another way, what would happen if I allowed an under-25 undeclared to drive the rental vehicle and we had an at-fault accident? – Paul

Declining the rental company's insurance doesn't mean that you're absolved of the conditions of the contract you've entered with it. On a standard rental agreement, this typically includes declaring all drivers. As you mentioned, some agencies do not permit drivers under the age of 25 to operate their vehicles.

What are the potential consequences of not declaring a driver? "Every situation is different," says Bill McNeice, President of the Associated Canadian Car Rental Operators.

He says that in the event of loss or damage to its vehicle, the rental company will turn to you – or your insurance provider – to recoup the loss. If you decline the insurance offered by the rental company and accept responsibility for any damages to the vehicle, you'll want to make sure you have adequate coverage.

"If (the customer has) waived that, so they're responsible for all physical damage, and they write off a $30,000 car and tomorrow we say, 'Mr. Smith can we have our $30,000 now?'" says McNeice. "If there was another driver that happened to be involved in it, as long as the coverage is there, that's all we're really looking for, for the damage recovery."

From an insurance perspective, and specifically when relying on coverage from your own policy, there are things to consider before allowing someone else to drive a car you've rented.

"There are two parts to any auto policy in Canada," says Natalie Dupuis, senior product manager, auto, at RBC Insurance. "First, the part that covers liability on the vehicle that you're renting.

"So this is: I'm driving that car and I have an accident and I'm at fault. The damage is to the party, and not the vehicle I'm driving itself. The damage is to another car. So that portion is included in your auto policy provided that vehicle I'm renting isn't owned by me and it's not something I use on a regular basis.

"So if I'm going on vacation and I'm renting a car from a rental agency, that portion of my policy is automatic and it covers myself and my spouse if we live in the same household," says Dupuis. "It doesn't cover any other drivers in my household, even if they're listed in my policy."

The minimum third-party liability required in most provinces is $200,000. However, you may want increased coverage, ideally more than a million dollars. In addition, you'll want coverage for damages to the rental car itself.

"Now you'll need to add a rider or an endorsement to your policy for car rentals. It's called the 27 endorsement and it's the same number in all provinces – they might have some letters at the end of it," says Dupuis.

"It extends your policy to cover the damages for the actual vehicle and usually the protection is the same as it would be for the car that you normally cover through your insurance policy. And it's a lot less than buying it through a rental agency."

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