Overlap: Understanding Insurance Limits When Renting a Car on Business

By Mike Drew, The Reschini Group

Understanding Insurance Limits when Renting a Car for Business
Understanding Insurance Limits when Renting a Car for Business

Your flight had been delayed and you’re running late for an important appointment in a new city.  All you want from the car rental stand is to get registered, grab the keys, and follow the GPS to your destination.  But what are the rules? Let’s start with the basics – Liability coverage, which protects against bodily injury or property damage to a third-party arising out of the use of a rented vehicle, and Physical Damage, which protects against damage to the rented vehicle.

Liability Coverage – A firm’s liability risk exposure can be protected when renting a vehicle by purchasing Hired & Non-Owned Automobile (HNOA) Liability coverage, which protects the Insured for liability arising out of the use of vehicles within the course of business, which is not owned by the Insured. HNOA would shield the Insured Entity from liability when exposed to employees using their own vehicles on company business (Non-Owned Auto Liability) and employee renting or hiring vehicles (Hired Auto Liability).  HNOA Liability coverage is an extremely important coverage to consider if you have employees using their personal vehicles and renting vehicle for business within the U.S.

Physical Damage – Hired Car Physical Damage provides protection against costs associated with damages to a rental car when used within the course of business in the U.S., and helps mitigate a loss suffered against the company should that vehicle be rented under the company’s name. Since most vehicles are typically rented under the employees’ name, it is prudent to have the “Autos Rented by Employees” endorsement added to the policy. If employees are using corporate credit cards or their personal auto coverage to opt-out of the physical damage coverage when renting a vehicle for business, please note that coverage may not be sufficient to cover a total loss, thus exposing your organization to possible out-of-pocket expenses.

Each year, liabilities assumed under rental agreements have expanded to the point where, if the car spends two weeks in a repair shop following an accident, the renter becomes liable for the rental company’s lost revenue. In addition, storage fees may be passed on to the renter and, under some agreements, the renter may be required to pay for “diminution of value,” or the reduction in resale value for a vehicle that has been in an accident. Responsibility for these damages may be avoided by purchasing waivers offered by the car rental company.

To activate coverage, where a credit card used to rent the vehicle pays for the loss if your insurance doesn’t, the cardholder must be the primary renter and must decline the Limited Damage Waiver/Collision Damage Waiver options. Credit card coverage varies, and may change at the credit card company’s discretion. Also, if the renter violates any terms of the rental agreement, credit card coverage is voided. Plus, credit cards may exclude rented SUVs and weather-related damage, like flood and hail.

Don’t let the hard sell push you into a decision that’s not right for your particular situation.  The professionals at The Reschini Group can help you sort out the best option for you to select when renting a car.  Contact us at 724-349-1300 to set up a time to talk.

Copyright 2016 The Reschini Group

 The Reschini Group provides these updates for information only.  To make decisions regarding insurance matters, please consult directly with a licensed insurance professional or firm.