Risk & Business Magazine Spectrum Insurance Magazine Fall 2018 | Page 29
RENTAL CAR INSURANCE
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 LDW
or CDW offered by the car rental company,
your responsibility for damages will be
waived.
ABOUT RENTAL INSURANCE
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.
ABOUT YOUR BUSINESS AUTO POLICY
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 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
ABOUT PERSONAL AUTO POLICIES
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.
ABOUT CREDIT CARD COVERAGE
Will the credit card used to rent the vehicle
pay for the loss if your insurance doesn’t?
To activate coverage, the cardholder must
be the primary renter and must decline
the LDW/CDW. Nothing is standard
with credit card coverage, and it may be
changed from time to time at the credit
card company’s discretion. Also, if you
violate any terms of the rental agreement,
the credit card coverage is voided when
you need it most. Many credit cards
exclude rented SUVs, and some exclude any
weather-related damage, like flood and hail.
MINIMIZING THE RISK
What should you do to minimize
your risk? We recommend the
following:
• Dealing with one corporate-
approved rental company, if
possible. This will establish that
the rentals are for business use
and that the business is renting
the vehicle, not the employee.
Review the contracts of at least
three rental car companies and
choose the one that best suits
you. Make sure to sign a blanket
agreement for all rentals and
keep a copy on file.
• Taking the LDW/CDW coverage
or self-insure any exposures not
covered by hired car physical
damage. Such exposures
typically include loss of use,
diminution of value, storage
fees, and administration and
claims expenses. Some loss of
use may be provided by your
Business Auto policy. Ask us to
review this for you. Depending
on how often your firm rents
vehicles and the cost of LDW/
CDW, self-insuring might be a
good option.
• If you purchase LDW/
CDW, make your employees
understand the “Prohibited
Uses” section or any other
section that explains actions
that will void coverage, even
though you paid for it.
• Continue to carry hired car
physical damage on your
business auto policy.
PROPER PLANNING IS NO ACCIDENT
Car rental insurance has important
considerations. If you need help sorting
through this coverage with an expert
who understands your needs, call your
insurance broker. +
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