When renting vehicles for business
use, it is important to fully understand your insurance coverage.
Coverage varies from one rental agency to
the next, so it’s vital to be familiar with
potential risks and how to protect against
them.
Recently, rental agreements have evolved,
which creates possible pitfalls for auto
renters.
“Each year, the liabilities assumed under
rental agreements expand,” says Jim
Kapnick, president of Kapnick Insurance
Group.
Smart Business spoke with Kapnick
about how to minimize risk when renting a
car for business purposes, how liabilities
have expanded in recent years and how to
proceed in the case of an accident.
How can companies minimize their risk when
renting cars?
If possible, work with one corporate-approved rental company. This will establish that the rentals are for business use and
that the business is renting the vehicle, not
the employee. Review the contracts from at
least three rental car companies and choose
the one that best suits you. This will allow
you to make informed decisions regarding
accepting or rejecting the Loss Damage
Waiver (LDW) or Collision Damage Waiver
(CDW) and properly structuring your business automobile insurance policy.
Also, include hired car physical damage
coverage on your business automobile
policy.
What are some basic rental procedures that
should be followed when traveling for business?
- List both the business name and your
personal name on the rental agreement. - List the business address, not your
home address, on the contract. - Do not purchase gas from the rental
agency. Rather, fill the vehicle prior to
returning it.
Should drivers reject or accept the insurance
offered by rental car companies?
In our opinion, the coverage under most
rental agreements is unreliable since there
are provisions in every rental contract that
can void coverage. For example, coverage is
often voided if you have a single drink
before driving, if an unauthorized driver is
operating the vehicle, or if the car is taken
on unpaved roads. For this reason, we have
been advising our clients to purchase hired
car physical damage on their business auto
policy and reject the ‘insurance’ offered
when you rent a car.
What are the limitations of personal auto
policies and credit card coverage in regards
to rental car insurance?
Some personal insurance policies will not
cover an SUV, van or pickup truck being
used for business. Plus, a personal automobile policy won’t cover if physical damage
coverage is not provided — a likely case if
the person drives an older vehicle. Also, the
claim will be handled on the personal automobile policy, which will be on the driver’s
loss record and might result in premium surcharges and/or cancellation of coverage.
Typically, with credit card coverage, 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 or hail.
How have liabilities assumed under rental
car agreements expanded in recent years?
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
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. These two items typically are not
covered on insurance policies, so unless
you purchase the LDW or CDW offered by
the car rental company, these amounts will
be your responsibility.
How should a driver proceed in the event of
an accident?
The same rules apply as an accident in an
owned vehicle:
- Stay calm and don’t argue with others
involved in the accident. - Call an ambulance if anyone is injured.
Assist those injured, but do not administer
first aid unless you are qualified. - Call the police, and do not discuss what
happened with anyone except the police. - Do not admit responsibility for the accident or sign a statement.
- Report the claim to your insurance carrier representative.
JIM KAPNICK is president of Kapnick Insurance Group. Reach
him at (888) 263-4656 x132 or [email protected].
Kapnick Insurance Group is a member of Assurex Global, an
international network of insurance and employee benefit brokers.