Rental Car Insurance: To Buy or Not to Buy?
Traveling can make the life of a business owner even more stressful. We've all had the experience of rushing through an airport, picking up luggage at the baggage claim and then hustling over to the car rental desk. The person at the counter reviews your rental agreement, and asks if you’d like to purchase the overpriced insurance. What should you do?
If you’re feeling anything like Jerry Seinfeld in this clip, you probably aren’t in the right frame of mind to make an informed decision.
Don’t worry - I can help prevent your next visit to the car rental desk from turning into a sitcom scene.
I find that most small business owners rent cars in their personal name when they go on a business trip. In this case, if you have a car insured in your name or your spouse’s name, the insurance on that vehicle follows you to the rented vehicle. This includes damage to the car itself. Your out of pocket expenses will include your policy deductible, and charges for the rental company’s loss of use of the vehicle. The rental contract may also require replacement of the vehicle, a cost above the depreciated amount that your insurance policy will allow for the loss.
Many drivers rely on their credit cards for rental car protection. I am unable to comment on the content of those policies. If you don't want any headaches associated with the rental of the car, we urge you to buy their insurance. If you are comfortable with taking some risk, you can decline the rental agency’s insurance. Just be sure you are prepared to deal with the hassles that are certain to follow should an accident occur.
Renting a car through your business name is more complicated. The protection that follows you as an employee is dependent on the coverage and endorsements included in your business auto policy. Coverage will not be provided if the vehicle if it is not being utilized for business purposes at the time of the accident.
Most business auto policies are written with "hired auto coverage". This provides protection to the company if autos are rented in the company name and bodily injury or property damage is caused to others by the rented vehicle. The rented car itself is not covered unless the policyholder has purchased "hired car physical damage coverage". This type of coverage is usually not provided unless it has been requested by an insured.
Often times, an employee on a business trip will rent a car in their own name, not in the company’s name. In this case, the coverage reverts back to that described above with the employee being ultimately responsible for the car. The employee will need to have a personally insured car to protect himself if he chooses not to purchase the rental car coverage. Some insurance companies offer endorsements that cover the employee while renting a vehicle as long as the vehicle is being utilized for business during the time of the loss.
My suggestion is to purchase rental car insurance if you want to be free of all liability and headaches. If you are more of a risk taker, give us a call so we can review your coverage and be sure you have the right endorsements attached to your policy.