When traveling on business and renting a car you are given a choice to purchase or reject insurance offered by the rental car company. The most common of these coverages include Loss Damage Waiver, Supplemental Liability Insurance, Personal Accident Insurance and Personal Effects Coverage. When asked if you want to purchase their insurance, the following questions probably come to mind…
“What is it?”
“Do I already have it?”
“Should I buy it?”
The following article defines various coverage options, gives examples of where you may already have this coverage, and offers recommendations for renting a car in the United States and its territories.
LOSS DAMAGE WAIVER
What is it?
Loss Damage Waiver (LDW), also known as Collision Damage Waiver, is not insurance. LDW is an agreement where the car rental company gives up its right to collect any damages from the renter if a vehicle is damaged or stolen. If coverage is rejected and a loss occurs you are financially responsible, even if you are not at fault. Not only are you responsible for repair or replacements costs, this financial obligation includes:
- Loss of Use – the earnings lost by the rental company when the car is being fixed and is not available for rent.
- Diminution in Value – loss of resale value when a vehicle is involved in an accident
- Administrative Fees – including, but not limited to, towing, impound, and storage.
LDW will not pay if the renter violates any contract restrictions such as use by an unauthorized driver, failure to lock the car when parked, racing, driving under the influence, etc.
If your firm has a Business Auto Policy and has purchased Hired Auto Physical Damage Coverage, then the Business Auto Policy would provide physical damage coverage (repair and replacements costs) for the rental car.
- If your firm does not own any vehicles, they may have some coverage for Hired and Non-owned autos. Please note that this is liability coverage only and will not provide Physical Damage Coverage.
Your Personal Auto Policy will provide Physical Damage Coverage on a rental car only if you have purchased Physical Damage Coverage on at least one of your personal autos. Physical Damage Coverage is only required if there is a loan on the car so you may not have this coverage. If you do not have Physical Damage Coverage on any personal autos, you Personal Auto Policy will not provide any coverage for the rental car.
Another source of possible coverage is your credit card. Most major credit cards provide rental car benefits. This coverage is quite complex, changes frequently and is based on the type of card you have. Credit card plans typically provide secondary coverage to your Personal Auto Policy and do not cover Loss of Use or Diminution of Value. In order to qualify for any benefits offered by your credit card company, the rental must be paid in full with the credit card that provides the coverage. You must also decline the auto rental company’s Loss Damage Waiver and be the primary renter of the car.
The Loss Damage Waiver is the coverage that people should examine most closely. While Business Auto Policies, Personal Auto Policies and credit card companies offer some coverage, there may be gaps for some of the indirect expenses you might face – such as Diminution of Value and Loss of Use. If your firm does not rent cars on a regular basis, spending an additional $10-$25 a day to buy the LDW is probably wise. If you are involved in an accident and have purchased the LDW, the claim will be handled directly with the rental car company and your insurance company will not need to be involved.
If your firm regularly rents vehicles for business travel, we recommend working with one car rental company. Working exclusively with one rental company will allow you an opportunity to modify terms and negotiate pricing. All employees will have a clear understanding of the coverages provided through the firm’s insurance and what coverages they need to select when renting a car.
SUPPLEMENTAL LIABILITY INSURANCE
What is it?
Supplement Liability Insurance (SLI) provides third party liability coverage if you are at fault in an automobile accident.
We recommend that every firm purchase Hired and Non-Owned Liability insurance. This liability only coverage is available even if your firm does not own any vehicles. Hired and Non-owned coverage is in excess to other coverages available, including your Personal Auto Policy and any rental car company’s policy.
Your Personal Auto Policy liability coverage extends to any vehicle you drive, including a rental car. If you only carry the minimum liability requirements on your personal auto policy, it may not be enough protection if you are involved in a serious accident, whether in your own vehicle or a rented one.
The cost of SLI is about $10-$15 per day and typically provides up to $1 million in liability protection. We do not recommend purchasing this coverage if your firm has Hired & Non-owned Auto Liability Insurance and your Personal Auto Policy has adequate limits of liability. If you are concerned about not having enough liability protection, we recommend increasing limits on your Personal Auto Policy rather than purchasing it from the rental car company.
PERSONAL ACCIDENT INSURANCE
What is it?
Personal Accident Insurance (PAI) provides medical coverage for you in the event of accidental death or bodily injury for the duration of the rental.
If your firm has a Workers’ Compensation policy, and you are using the rental car for business purposes, you will have coverage for medical treatment if you sustain an injury during the accident.
Your health insurance policy will provide medical coverage in the event of an auto accident with injury.
If your firm has Workers’ Compensation and/or you have a health insurance policy, we do not recommend purchasing this coverage. If you do not have health insurance, and plan to spend some personal time in the rental car, you may personally choose to purchase this coverage.
PERSONAL EFFECTS COVERAGE
What is it?
Personal Effects Coverage provides coverage for your personal belonging while in the vehicle, a hotel or other building for the duration of the rental.
Your Homeowner’s or Renter’s policy provides some coverage for your personal effects while away from your home. A Homeowner’s/Renter’s policy does not provide coverage for any property owned by your firm.
Your firm’s Property Policy should provide coverage for business personal property away from the premises. If you are traveling with business property, you and your firm should ensure that the Business Personal Property limit sufficiently covers any property taken on a business trip. Contact your agent or refer to your policy for coverage limits.
We do not recommend purchasing this additional coverage because of the coverage provided by a Homeowner’s/Renter’s policy and your firm’s Commercial Property Policy. If you do not have a homeowner’s/renter’s policy and/or your firm does not have a Business Personal Property policy, you may want to consider purchasing this coverage.
OTHER RECOMMENDATIONS
Develop and Publish a Rental Car Policy
Your firm should develop a written Rental Car Policy and distribute it to all employees on an annual basis. This policy should cover the following:
- Your firm’s preferred rental car company and corporate account number, if applicable.
- Procedure for purchasing or rejecting the Loss Damage Waiver and other coverages.
International Travel
If you travel and rent vehicles internationally, talk with your insurance agent about the unique risks and coverage options available for international car rentals.