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When youâre on the road for business or sending employees on business travel, renting a car is a quick and affordable option. However, it does put your business at risk for liabilities if an accident occurs. Understanding your rental car insurance policy options is essential to protecting your company.
How does rental car insurance work? Does your existing business auto policy cover rental cars? Is it affordable to purchase coverage through a rental car company? Let's dive into the details to ensure you get the right business coverage.
What is covered by an auto insurance policy?
Auto insurance policies can vary greatly depending on factors such as the type of vehicle being insured, the driver's age and driving record, and the geographical location of the insured vehicle. However, generally speaking, coverage can be purchased to include these four important areas:
1. Liability coverage
The purpose of liability insurance is to provide financial protection for both the business and employees in case a third party sues them for damage to property or bodily injury caused by their actions or business operations.
2. Physical damage coverage
The vehicle will be covered by physical damage insurance if a collision, fire, theft, vandalism, or any other caused event damages it.
3. Personal accident insurance
As part of personal accident insurance, medical expenses incurred as a result of an accident are covered, such as hospitalization, surgery, doctor's fees, diagnostic tests, ambulance fees, rehabilitation costs, and prescription medications.
4. Personal effects insurance
In case of an accident, personal effects insurance covers clothing, jewelry, and electronics that may be damaged, destroyed, or lost inside a vehicle. Personal effects can also be protected from theft, fire, or other unexpected events when not with the vehicle. A personal property insurance policy also provides peace of mind and financial protection for unforeseen losses or damages.
Contact your insurance company to see which of the above you have and if your business policy covers hired cars, in particular. If you anticipate regularly using rental cars for employee use, hired liability and hired physical damage coverage should be at the top of your list.
How to insure employee rental car use
Many credit cards have additional rental car coverage. If you or an employee is paying for the rental with that card, this may be a practical option.
How and when insurance policies kick in depends on a few things. Generally, coverage will occur when an employee uses a rental car with your permission, under your business name, for work-related activities.
Tip: Check your business credit card for additional benefits
Option 1: Employee's personal auto insurance as primary coverage
When renting a car for work purposes, employees should check their personal auto insurance plan to see if it covers rental cars. Unless your commercial auto insurance plan explicitly covers employee rental cars, the employee's policy will be primary.
This doesn't mean you won't be responsible in the event of an accident. Employees' insurance companies may pay claims and then seek reimbursement from your business's insurer. Your business may be liable for excess damages if an employee's personal insurance policy doesn't cover all the expenses. Here is where having a commercial auto policy can help.
Option 2: Purchase a business auto policy with rental car add-on
In the event you don't already have one, consider purchasing a commercial auto policy to cover rental cars or trucks. Depending on your state and policy terms, a business auto policy can include employee-hired auto insurance. Unlike the previous example, this type of coverage places your business coverage as the primary coverage plan. Add physical damage coverage for the vehicles to help cover the cost of repairs or loss.
Option 3: Purchase physical damage coverage through the rental car company
If you have an existing auto insurance policy, purchasing insurance (or a collision damage waiver) from the rental company is unnecessary. However, in the event of physical damage to the car, this can be a more convenient option for processing claims.
Note: While this option can remove some hassles, it can also be the least cost-effective.
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Save even more and get the best car rental rates from Enterprise/National and Capital One Business Deals. Sign up for free and get exclusive access to discounts on rental cars, discounts on gas, and more. You can also find great tips to help save on all of your business travel needs.