What is "loss of use" in car insurance?

If you use your car every day, you're probably already well aware of how dependent you are on it. For some of us, public transportation simply isn't an option, whether due to where we live, the time of day, or its reliability in our area. Unfortunately, things happen to our vehicles. There are fender benders, hailstorms, thefts, and so on – and in the worst-case scenarios, we might find ourselves without an easily accessible vehicle for a temporary period while repairs are carried out.

Your vehicle is being repaired, but you still have work to do. What do you do? "OPCF 20" is an auto insurance endorsement—an optional add-on—that you can purchase and carry with your existing auto insurance policy. It will reimburse you for a rental car that you can then use while your vehicle is being repaired (provided the claim is approved). This endorsement is commonly referred to as "loss of use." Here's how it works.

How does "loss of use" work in car insurance?

As supplemental coverage, loss of use is not included in your standard auto insurance policy and requires a separate purchase. If a qualifying event occurs—for example, if your car is in a body shop due to a covered loss—your loss of use coverage will kick in to cover the cost of a temporary replacement. Please note that to qualify for loss of use coverage, you must first have collision and comprehensive coverage. Loss of use can then be added to your policy for a slightly higher premium.

The loss of use allowance cannot be used solely for a rental vehicle. It can also be used for taxi services, ride-sharing services, or even to purchase public transportation tickets.

However, loss of use protection has its limits. If you are under 25 in Quebec, you will not be legally able to rent a vehicle and therefore cannot use your loss of use coverage for rentals. You can, however, still purchase this coverage and use the costs to cover taxis and public transportation. Furthermore, loss of use coverage is limited to a specific period and may end if any of the following occur during your coverage period:

Your coverage limit has been reached

With any insurance policy, there are coverage limits. The amount of coverage you can have for your loss of use policy will vary from company to company. You can choose to purchase different limits, for example, if you drive a luxury vehicle and want your replacement vehicle to look like one. If you don't care about the type of replacement you receive, you can purchase coverage for around $2,000. What does this mean? It means you can use up to $2,000 to cover the cost of using your rental vehicle. Once you reach this amount, all remaining costs are your responsibility.

Some companies won't limit you to a specific dollar amount and will instead use a certain time period. Generally, this is around 30 days (from the moment your vehicle is sent to the shop for repair). If your vehicle is in repair for more than 30 days, you will be responsible for any additional rental costs.

You are receiving a settlement for total loss

Some vehicles are worth less than what it would take to replace them. If this is the case with your vehicle, your insurance company will choose to write off your vehicle entirely and pay you so you can buy a new one. If there is enough time to receive payment following the accident, you may be able to use your loss of use coverage to pay for a rental car, taxi, ride-sharing, or public transportation until you receive your settlement.

Your vehicle has been repaired to your specifications.

Your loss of use protection will end as soon as your vehicle is repaired and ready for pickup, even if you still have coverage remaining. Your insurance company will then arrange for the return of the rental vehicle so you can get back to your own car.

How much does the "loss of use" cost?

Costs always vary from carrier to carrier, but since loss of use coverage is an add-on to your existing policy, it won't break the bank. A standard loss of use endorsement can cost you between $30 and $90 per year. If you want to increase your loss of use coverage—for example, if you want a luxury rental car in case your own car needs repairs due to an insurable loss—you can choose to upgrade your coverage, which will increase your premiums. Similarly, if you want to use the car for a longer period, that will also increase your premiums.

What's the best way to keep your rates affordable? Talk to a Panda7 broker about your options and what best suits your existing car insurance policy. Your vehicle is important to you, so going without that coverage and having to find your own transportation in the event of an accident can be quite costly. Loss of use is just a small additional expense and can give you peace of mind knowing you won't have to make arrangements if your car is ever temporarily unavailable, or if you're still waiting for a total loss settlement to buy a new car.

Do you have other questions about loss of use protection? Don't worry. Speak with Panda7's friendly insurance brokers for more information about this specific endorsement, its costs, and how you can make it part of your overall auto policy in Quebec.