What is rental car insurance, and is it mandatory?

Rental car insurance is a key element of safety and financial protection for drivers in Calgary. This article outlines the legal requirements, types of coverage, and cost optimization strategies using Alberta as an example.

Legal framework for car insurance in Alberta

The province of Alberta has clear requirements for auto insurance, which are set out in the Insurance Act:

  1. Compulsory insurance includes:
  • Third-party liability – minimum $200,000
    • Accident benefits – covers medical expenses and loss of income
  1. Additional options (such as CASCO or CDW) are not regulated by law but are recommended by market practices.

Special features for rental cars

According to the 2011 amendments to the legislation:

  • Primary responsibility for traffic accidents lies with the renter
  • Insurance payments are made in the following order:
  1. Renter's personal insurance
  2. Driver's insurance
  3. Rental company's policy

Types of insurance when renting

1. Basic coverage (included in the rental)

Type Coverage amount Source
Third-Party Liability Compensation for damages to third parties
Accident Benefits Medical assistance, rehabilitation, funeral expenses

2. Additional options

Collision Damage Waiver (CDW/LDW)

  • This is not insurance, but a contractual waiver of claims by the company
  • Cost: $9.99–$39.99/day
  • Covers:
  • Damage/theft of the car
  • Loss of company profits
  • Administrative expenses

Supplemental Liability Protection (SLP)

  • Increases liability limit to $300,000
  • Recommended for asset protection

3. Personal sources of coverage

  • Credit cards: Visa/Mastercard Gold+ provide CDW
  • Personal auto insurance:
    • OPCF 27 (for Ontario) equivalent in Alberta
  • Coverage limits – Canada and US only

Is additional insurance required?

CDW/LDW:

  • Not required by law
  • Required only if no alternative sources of coverage are available

Example: A renter with a Platinum credit card that provides CDW may decline the company's services.

Key risks without insurance

  1. Deductibles:
    • Average amount – $3,000–$5,000
  • Exceptions: damage to tires, glass, undercarriage
  1. Legal claims:
  • The $200,000 limit is often insufficient to cover medical expenses
  1. Administrative fines:
  • “Loss of Use” – compensation for lost profits

Cost-saving strategies

  1. Use credit cards with CDW included
  2. Long-term rental: discounts of up to 40% on CDW
  3. Deductible analysis: comparison with the cost of additional coverage

Conclusions

Rental car insurance in Calgary is based on the principle of “mandatory basic + optional additional”. Although CDW/LDW are not legally required, not having them can result in financial losses. The optimal strategy is to:

  • Check coverage through credit cards/personal insurance
  • Analyzing deductibles and risks
  • Using long-term programs to reduce costs

For business customers in Alberta, SPF #6 Non-Owned Automobile Liability, which covers civil liability for rented cars, is particularly relevant.