What Is Loss of Use Coverage?

Shopping for car insurance? The process might feel overwhelming and confusing with all the options and coverages to choose from, however, BIG is here to make the process smooth and simple. When reviewing your options, your insurance broker will likely offer you “Loss of Use” coverage to add to your policy. If you’re not sure what it is, you’ve come to the right place. This blog will break down what loss of use coverage is and explain how it works to help you make an informed decision about your coverage. 

Imagine this…

Car accidents can cause significant damage to your car and can even result in a total loss. Major repairs can take days, sometimes weeks, to complete; the same goes for vehicle shopping. So, how are you going to get around while you wait for repairs to be completed or until you find a new car? Without loss of use coverage, you would be paying out of pocket for alternative transportation such as a rental car, taxi, or public transit.

What is Loss of Use?

So what exactly is loss of use car insurance? The meaning changes based on whether you caused damage to another owner’s vehicle or your vehicle was damaged. For example, when drivers damage rental cars, rental companies can pursue them for rental income losses while the vehicles are being repaired. In that case, loss of use coverage would protect the driver from paying for those damages out of pocket. Today, however, we’re looking at the loss of use as it pertains to you being left without a vehicle following an accident. 

When you have loss of use insurance, your carrier will provide a replacement vehicle or reimburse you for your transportation costs while your vehicle undergoes repairs or until you find a replacement in an insured claim. In a qualifying claim, you can be reimbursed for having to rent a car, use public transit, take a taxi, or rideshare.

If you are unsure whether this coverage is included in your existing policy, it’s always best to check in with your broker. BIG brokers will always take the time to help you understand your policy in detail.

Is Loss of Use Coverage Mandatory in Canada?

Some forms of car insurance are mandatory across Canada. However, in most provinces loss of use coverage is an optional add on to your policy. Coverage minimums also vary between provinces. For example, in Nova Scotia, the minimum liability coverage for any driver is $500,000, but only $200,000 in Ontario. Contacting a BIG broker can ensure you purchase a plan that meets the requirements for your province.

Do I Qualify for Loss of Use Coverage?

Loss of use coverage is available when you have physical damage coverage on your car insurance policy, such as collision coverage, comprehensive coverage, or all perils coverage. To learn more about physical damage coverage, check out our blog here. 

How Much Does it Cost?

Naturally, many customers wonder: What is loss of use in car insurance going to cost me? Loss of use coverage varies across BIG’s various insurance carriers and can also fluctuate based on the coverage amount you want. Generally, it could cost you between $60 and $80 for coverage for the year. Discounts and bundles can also factor into the cost, such as bundling it with Rental Car Coverage, which we explain in another blog here: Rental Car Insurance Coverage.

Is There a Deductible for Loss of Use Claims?

There typically is no deductible associated with using your loss of use coverage specifically. However, if you need to take advantage of this coverage, it is likely because your vehicle is being repaired under a covered claim. So, you will still need to pay the deductible for your claim under the affiliated part of your policy (often collision or comprehensive coverage). However, if you have met your deductible for the year, your insurance company cannot ask for any additional deductible associated with loss of use.

How Long Does the Coverage Last?

Loss of use coverage will typically last until either your vehicle repairs are completed, you receive a total loss settlement, or you have reached your coverage limit – whichever comes first. As we mentioned above, different limits are available for this coverage – $1500 is usually a standard amount, but you can request higher limits from your broker.

Are There Any Restrictions?

Loss of use coverage does have a few limitations that you should be aware of.

1. The vehicle you rent should be a similar size, make, and model to the vehicle that was damaged, totalled, or stolen. Your carrier will determine what constitutes a “fair rental” based on your owned vehicle.
2. For drivers under the age of 21, it’s unlikely that you’ll be able to rent a vehicle based on rental car company restrictions. Loss of use coverage can still be used to cover public transit or taxi costs in this case.
3. Gas and additional costs associated with the rental aren’t typically covered by loss of use coverage.

Does Comprehensive or Collision Insurance Include Loss of Use?

While loss of use coverage is an optional endorsement for both collision and comprehensive insurance, usually, it is not automatically included in either type of policy. You will need to add it, and even then, you can only use it under a qualifying claim you make under either policy. There are stipulations and exclusions, so it’s also important to have a thorough understanding of collision and comprehensive coverage. 

Many drivers misunderstand that comprehensive insurance covers damage caused in any situation, but it only covers damage from non-collision accidents, such as falling objects or vandalism. So if a wild animal rams into the side of your vehicle, and you only have collision coverage, this won’t qualify as a covered event, and you will not receive reimbursement  — nor can you use your loss of use endorsement.

What are Some Other Add-on Coverages for Auto Insurance?

If you want the most comprehensive coverage that will protect you in a range of situations, here are other endorsements to add to your insurance:

• Liability for Damage to Non-Owned Automobile(s): This will cover you in the event that you cause damage to a vehicle that you do not own, such as a rental vehicle or one you borrow from a friend. In some cases, this insurance will also provide accident benefits, so if you are injured in an accident involving a non-owned vehicle, cannot work, and struggle to pay for your normal living expenses, you could receive reimbursement through this plan.
• Accident forgiveness: This refers to an endorsement that prohibits your insurance carrier from raising your premium after your first at-fault accident. It is only available in certain provinces, including Alberta, Nova Scotia, and Ontario.
• Depreciation waiver endorsement: This endorsement prevents your insurance carrier from deducting your vehicle's depreciation from a settlement payout. It can be a highly valuable add-on for new vehicle owners who want to safeguard their investment.

Why Should I Get Loss of Use Coverage?

While loss of use is an optional endorsement, having it on your policy can help alleviate the emotional stress and financial burden when you’ve been through an accident. The situation can be incredibly taxing as you arrange repairs, shop for a new vehicle, and so on. Not having to worry about paying for a car rental removes one of the many moving pieces while you go through the process. As an optional add-on, a loss of use endorsement might not be worth the investment for you if you can go without a car for a week and walk or cycle to work. A BIG broker can help you decide whether it’s a good fit for you.

With a better understanding of loss of use coverage, we hope you can make a wise decision about the coverages you need. If you ever have questions about your existing policy or still feel unsure about the loss of use meaning in car insurance, our brokers are here to answer your questions. To add loss of use to your policy, contact our brokers or request a quote today!