Loss of Use Coverage - Do you have enough?

1 March 2022

As if Covid-19 wasn’t enough to deal with, the world is in turmoil and supply chain issues continue. Even though there are global challenges, life goes on. Claims occur and policyholders should review their coverage limits to ensure adequate amounts are available in the event of a claim.

Loss of use coverage or transportation replacement is an important coverage to consider. This coverage is triggered when involved in a chargeable or “at fault loss” or a hit and run situation to provide a rental vehicle while the damaged vehicle is being repaired. The available coverage limits will vary from insurance company to insurance company. Some carriers provide a blanket limit, some will restrict the amount available per day, some will have a maximum amount of time the coverage is available.

With the current supply chain issues, delays in obtaining parts or even replacement vehicles due to a lack of inventory means that you may require more coverage or a longer duration for a rental vehicle. Accordingly, now is the time to review the parameters of this coverage on your policy. Although carriers are aware of the issues and delays, they may or may not extend coverage in a leap of good faith. After all, they are confined by the limits of the policy contract.

Most carriers will have various limits of coverage available. Contacting your carrier or your broker is the first step in deciding whether or not you have adequate limits. Keep in mind that when involved in a claim, even if it is non-chargeable, it is usually initially set up as a possible “chargeable” loss until third party liability can be confirmed.

Assessing the limit required may also be dependent upon the vehicle manufacturer. Prior to the pandemic, obtaining parts for Toyotas was challenging and policyholders would often run out of limit on the rental car while awaiting repairs. Most often, carriers would extend coverage for the rental vehicle in good faith but not always.

The type of vehicle being rented also plays a role in deciding what limit is required. If you own a higher end vehicle and rent the same type, the cost of the rental can be higher on a per day basis so the corresponding loss of use limit would need to be higher as well.

Reviewing your policy limits and your carrier’s available limits to be properly insured at the time of loss is essential to avoid disappointment and frustration during a stressful period when confronted with a claim.

Debbie Arnold, R.I.B. (ON), C.A.I.B.

Business Development Manager, Personal Lines