What is “Loss of Use” in auto insurance?
If you use your car every day, you’re probably already well aware of how much you depend upon it. For some of us, taking public transpo as a replacement is simply not an option, whether due to where we live, the timing, or its reliability in our general area. Unfortunately, things do happen to our vehicles. We get in fender benders, there’s hailstorms, theft, etc. – and in the worst of situations, we may be left without a readily accessible vehicle for a temporary period of time as repairs are being done.
Your vehicle is out for repairs, but you still have a job that needs to be done. What do you do? “OPCF 20” is a car insurance endorsement – an optional add-on – that you can purchase and carry with your existing auto insurance policy that will supply you with reimbursement for a rental car that you can then use during the time that your vehicle is being repaired (so long as 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 auto insurance?
As an add-on coverage, Loss of Use is not included in your standard auto insurance policy and requires separate purchase. Should a qualifying event occur, i.e., your car winding up in an autobody repair shop because of a covered loss, your Loss of Use coverage will kick in to cover the cost of a temporary replacement. Note that to qualify for the purchase of Loss of Use, you will first be required to carry collision and comprehensive coverage. Loss of Use can then be added to your policy for a slightly increased premium.
Loss of Use may not solely be used for a rental vehicle. It can also be used to use cab services, ride-sharing services, or even to purchase tickets for public transport.
However, Loss of Use coverage has its limitations. If you are under the age of 25 in Quebec, you will not be able to legally rent a vehicle and therefore cannot use your Loss of User for rentals. You can, however, still purchase this coverage and use the costs to cover taxi and public transport. Moreover, Loss of Use will only last for a specific period of time, and may end if any of the following items occur during your coverage period:
Your coverage limit is reached
With any insurance, there’s coverage limits. The amount of coverage you may have for your Loss of Use policy will vary from company to company. You may choose to purchase different limits, such as if you drive a luxury vehicle and want your replacement vehicle to resemble that. If you don’t care what type of replacement you receive, you can purchase around $2,000 limit. What does this mean? This means that you can use up to $2,000 to fund the usage of your rental vehicle. Once you’ve hit that amount, any remaining costs are on you.
Some companies will not limit you by a dollar amount and will instead use a certain period of time. Typically, this is around 30 days (beginning when your vehicle is sent to the shops for repairs.) If your vehicle is in repairs for longer than 30 days, the additional rental costs are up to you.
You receive a total loss settlement
Some vehicles are worth less than it would take to replace them. If this is the case for your vehicle, your insurance company will opt to write off your vehicle entirely and pay you out so that you can purchase a new vehicle. If the time it would take to receive a payout following the accident is substantial enough, you may be able to use your Loss of Use coverage to pay for a rental, taxi, rideshare, or public transport until you receive your settlement.
Your vehicle has been repaired to your standards
Your Loss of Use coverage will end as soon as your vehicle is fixed and ready for pickup, even if you still have coverage remaining. Your insurance company will then plan to return the rental vehicle so that you can get back to your car.
How much does “Loss of Use” cost?
Costs always vary from carrier, but as Loss of Use is an extension that exists solely to sit upon the coverage you already have, it won’t break the bank. A standard Loss of Use endorsement may cost you roughly between $30-$90/year. If you want to increase your Loss of Use coverage, i.e., if you want a luxury rental car in the event yours must go to the shops for repairs due to an insurable loss, you may opt to increase your coverage – which will consequentially increase your premiums. Or, if you want to use it for a longer duration, this will also increase your premiums.
The best way to keep your rates affordable? Chat with a Panda7 broker about your options and what makes the most sense for your existing auto insurance policy. Your vehicle is important to you, so going without that coverage and having to suffice with finding your own alternative transportation in the event of an accident can be rather costly. Loss of Use is only a small added cost and it can give you peace of mind knowing you won’t have to scramble to make arrangements if your car is ever temporarily unavailable, or if you’re still waiting on a total loss settlement to purchase a new car.
Have further questions about Loss of Use coverage? Not to worry. Discuss with Panda7’s friendly insurance brokers for more information regarding this particular endorsement, its costs, and how you can make it a part of your comprehensive auto policy in Quebec.
