Understanding Rental Car Insurance

By Author: Chuck Wasson
Total Articles: 1
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Rental Car InsuranceRental Car Insurance

by Chuck on Jun 26, 2013
There are lots of reasons why we often rent cars. Your car might be in the shop for repairs; you’re planning a business trip and don’t want to put the miles on your personal car; or you’ve flown to your destination and now need a local car to get around. Whatever your reason, when you rent a car for business use, you need to understand the coverage options as it varies from car rental agency to agency. Don’t get caught by surprise!

We always suggest that you purchase Hired Car Physical Damage on your business auto policy and then reject the insurance offered by the rental car agency. Hired Car Physical Damage covers rented cars the same as it would your privately owned vehicle. But, be aware there are caveats that you need to understand.

If you are relying on your Hired Car Physical Damage on your business auto policy to protect you, but the vehicle isn’t rented by the business, the Hired Car Physical Damage coverage won’t respond to claims. Your employees should use the business name on the agreement and pay with a business ...
... credit card, if possible.
Each year, the liabilities assumed under rental agreements expand. At one time, renters were responsible only for actual damage to or theft of the vehicle. Over the years, the rental car companies have added loss of use. As a result, if the car is in the shop for two weeks after an accident, you, the renter, are liable for the revenue the rental car company has lost. Plus, storage fees may be passed on to you. In addition, some agreements require that you pay for “diminution of value.” This is the reduction in resale value for a vehicle that has been in an accident. If you purchase the Loss Damage Waiver (LDW) or Collision Damage Waiver (CDW) offered by the car rental company, your responsibility for damages will be waived.
Should you use coverage from the rental car company and remove the Hired Car Physical Damage from your business auto policy? This would be a good solution if you could rely on the rental car coverage. Unfortunately, there are provisions in every rental contract that can void the coverage. For example, coverage is often voided if the driver has a single drink before driving; if he asks someone to drive in his place and that person is not listed as an authorized driver; if the driver is under the age specified in the rental contract; or if the car is taken on unpaved roads. Unfortunately, there are many ways to void the LDW/CDW, and they vary from one agreement to the next.
Some personal auto policies won’t cover an SUV, van, or pickup being used for business. Plus, a personal auto policy won’t cover if the employee doesn’t carry Comprehensive and Collision — a likely case if the employee drives an older vehicle. Some policies exclude loss of use and all exclude diminution of value. And, if the personal auto policy does pay the claim, it will be on the driver’s loss record and might result in cancellation of coverage.
As you can see, car rental insurance can get confusing. Minimize your risk and contact your local independent insurance agent for advice! Stay safe and protected in your rental car!