What is loss of use in car insurance?
Loss of use covers the cost of alternate transportation that you need to use while your vehicle undergoes repairs. That may include a rental car, taxi fares, public transportation passes, and other costs you incur to get yourself around.
Loss of use coverage limitations
There are a couple stipulations, of course. Loss of use coverage only applies if the accident that damaged your vehicle was covered by the policy in the first place. So, if you struck a deer but you don’t have optional comprehensive or all perils coverage, you wouldn’t be able to claim loss of use expenses.
Loss of use isn’t necessarily standard on all policies for all types of accidents, either.
For example, in Ontario and Alberta, default loss of use coverage is only available if the vehicle is stolen, or if someone else is at fault for a collision and you’ve made a claim under direct compensation for property damage (DCPD) coverage. If you’re partially at fault, you’ll only have partial coverage for loss of use, too. You may also have some loss of use coverage if your vehicle is damaged by an uninsured driver. In BC, loss of use coverage comes alongside optional damage coverages like collision or comprehensive.
In many cases, you can expand your loss of use coverage with a loss of use endorsement, such as OPCF 20 in Ontario, QEF 20 in Quebec, and SEF 20 in Alberta. When you add one of these endorsements to your policy, you’ll be able to claim loss of use expenses for any accident that’s covered by your policy. Accordingly, these endorsements only make sense if you’ve also purchased optional coverages like comprehensive or collision.
If your vehicle is damaged, don’t assume that you can just rent a car and start claiming for loss of use charges. Speak to your insurer first to confirm your coverage amount, as this will help you choose a replacement that you can afford for the duration of your car’s repairs. They’ll help you arrange the repairs and your replacement transportation, too. Often, they can arrange preferred rates with a rental car company, helping to make sure your loss of use coverage lasts as long as possible in case your repairs take longer than expected, due to supply chain issues or a major weather event that sharply increases demand for repairs in your region.
How long does loss of use coverage last?
Like any coverage, loss of use has its limits. Your policy will pay for your replacement transportation up until one of the following happens:
- Your vehicle is repaired. Obviously, once you get your car back, your loss of use coverage stops.
- You’re offered a total loss settlement. If your insurer determines that your vehicle is a write-off and you accept a cash settlement, your loss of use coverage ends (because your claim is closed at that point).
- You reach your coverage limit. If your policy has a limit on loss of use coverage, it will only pay for your replacement transportation up to that limit.
Commonly asked questions
Is there a deductible for loss of use car insurance?
Normally, you don’t have to pay a deductible for loss of use coverage under your car insurance policy. However, since loss of use is part of a covered claim, you’ll still need to pay any deductible that applies to the repairs (like your collision or comprehensive deductible).
Can you rent any vehicle under loss of use coverage?
If you rent a vehicle covered by loss of use, your insurer will typically require that the rental is similar to your own vehicle. So, no free Ferrari while your Kia’s in the shop. This makes good financial sense, too — if your repair unexpectedly takes longer due to supply chain issues, a less expensive daily rental can help avoid a shortfall in your coverage by consuming it less quickly.
How much does loss of use coverage cost?
Adding loss of use coverage to your car insurance policy is typically inexpensive — often under $100/year. However, insurance pricing is based on numerous factors, so your costs could be different.
Does comprehensive or collision insurance include loss of use?
In Ontario, Alberta, and Quebec, loss of use coverage is not automatically part of optional damage coverages like comprehensive or collision. You’ll need to add it with an endorsement, such as OPCF 20 in Ontario. Otherwise, you would be limited to the standard loss of use coverage available only under certain circumstances, like DCPD claims.
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About the expert: Daniel Mirkovic
A co-founder of Square One with 25 years of experience in the insurance industry, Daniel was previously vice president of the insurance and travel divisions at the British Columbia Automobile Association. Daniel has a bachelor of commerce and a Master of Business Administration (MBA) from the Sauder School of Business at the University of British Columbia. He holds a Canadian Accredited Insurance Broker (CAIB) designation and a general insurance license level 3 in BC, Alberta, Saskatchewan, Manitoba and Ontario.
