A car rental company is business that provides cars for people who for one reason or the other do not have access to their own vehicles. Because of the nature of the business, a car rental company is not allowed to operate without carrying adequate insurance. The car rental business requires an excellent insurance carrier to insure both the business and each vehicle.
Numerous insurance companies specialize specifically in fleet insurance policies for truck, transportation and car rental business models. Finding one to partner with your car rental business depends on the business model you have and the requirements set by the carrier. The cost of insurance is typically passed on to the customer in many cases.
Rental cars are easily damaged on roads due to accidents or other unforeseen circumstances, and these disasters need to be paid for if the company is to continue bring in business. If your car was damaged due to another driver’s negligence, the other driver’s insurance company will pay your rental car costs for a reasonable length of repair time. If your car is totaled, many companies will pay for your rental as a courtesy, but they are not required to do so.
A lot of insurance companies out there offer packages that they claim are suitable for car rental businesses, but it behooves on you as a business owner to know which insurance policies would suit you best based on your unique needs. But be that as it may, we are going to analyse some of the insurance policies that you are supposed to carry if you want to successfully run a car rental business.
Best Insurance for Car Rental Business and How Much They Cost
Table of Content
General Liability Insurance
The most common and comprehensive type of policy car rental business owners invest in is general liability insurance (or CGL). This insurance policy protects you from being held liable in a collision. If you are at fault in a collision and injure another person, or damage someone else’s property like their vehicle, you will want to have liability insurance. Liability will cover the costs associated from the crash including the vehicle and medical benefits to anyone injured.
Some of the risks CGL insurance covers are:
- Bodily injury
- Property damage
- Medical payments
- Legal defense and judgment
- Personal and advertising injury
While businesses aren’t legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.
- Cost Of General Liability Insurance
The average car rental company in America spends between $450-$1,000 per year for $1 million in general liability coverage.
You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.
2. Commercial Property Insurance
If your rental car company owns its office space and/or parking lot, those assets should be protected with commercial property insurance. This coverage insures buildings, other structures, and certain equipment (usually not including rental cars). Commercial property insurance can be purchased through a business owner’s policy (BOP), but it can also be purchased alone.
- Cost of commercial property insurance
The median cost of commercial property insurance is $63 per month or $755 per year with a limit of $60,000 and a median deductible of $1,000. The median offers a more accurate estimate of what your business is likely to pay than the average cost of property insurance because it excludes high and low premiums.
3. Commercial Auto Insurance
Commercial auto insurance is used to insure commercial vehicles, including rental cars. Your rental car company will need this coverage for every vehicle that it owns and rents.
Rental cars tend to have high values because they’re fairly new and have low mileage. Make sure the limits of your company’s rental car insurance equal or exceed the business fleet’s fair-market value. Commercial auto insurance is frequently available through a package policy.
- Cost of Commercial auto insurance
The median cost of commercial auto insurance is $142 per month or $1,704 per year. The median cost offers a more accurate estimate of what your business is likely to pay than the average cost of commercial auto insurance because it excludes outlier high and low premiums.
4. Workers’ Compensation Insurance
Most car rental companies need workers’ compensation insurance because they employ workers. Most states require businesses that have employees to carry workers’ compensation coverage for them. The coverage is a safeguard against injuries and illnesses related to activities at work.
- Cost of workers’ compensation insurance
Car rental businesses pay a median premium of $47 per month, or $560 annually, for workers’ compensation. Because workers’ compensation insurance is regulated on the state level, the cost of a policy depends on where your employees are located. Companies with more employees and risks pay more for workers’ comp.
5. Commercial Umbrella Insurance
An umbrella policy is insurance that provides liability coverage above and beyond the limits of other underlying policies. In other words, it gives you extra coverage on top what you have from other liability insurance – General Liability, Auto Liability, and others.
If you’d like to protect your car rental company with more liability coverage, you may want commercial umbrella insurance. This insurance provides a secondary layer of liability protection, and limits can often be set in the millions of dollars. Commercial umbrella insurance is often available through a BOP.
- Cost of Commercial Umbrella Insurance
Because of the discrepancy between the high and low ends of cost, the average amount for umbrella insurance is about $1,500 a year for a $1 million policy. However, many businesses pay less than that with the median premium falling closer to $900 a year.
6. Personal accident insurance
This covers the driver and passengers for medical and ambulance bills for injuries caused in a car crash. Whether or not you should consider this depends on your health insurance and the personal injury protection (PIP) provided by your auto insurance, which will likely cover medical expenses.
7. Loss Damage Waiver (LDW)
Also referred to as a collision damage waiver, an LDW is not technically an insurance product—it is designed to relieve or “waive” renters of financial responsibility if their rental car is damaged or stolen. Waivers may also provide coverage for “loss of use,” in the event the rental car company charges for the time a damaged car cannot be used because it is being fixed, as well as towing and administrative fees. The LDW may become void if the accident was caused by speeding, driving on unpaved roads or driving while intoxicated. However, if you carry comprehensive and collision auto insurance, you may already be covered for damage to a rental car.
8. Personal Accident Insurance or PAI
Provides accidental death and dismemberment coverage to the driver and any passengers in the car at the time of the accident. Rental car agencies each have a different benefits package, but typically the driver is covered up to $100,000 and passengers receive $10,000.
- Cost: $7-$10 per day
Though this insurance is not required, but it better to buy it instead of leaving your business exposed.
9. Personal Effects Coverage or PEC
Sometimes called personal effects protection, this insurance policy gives you peace of mind for your personal belongings and valuables. However, there is a stated limit and will often need a deductible paid before a claim is paid out. Typically, the coverage is $500 with a $25 deductible per person, but there are limits as to how many passengers can claim.
- Cost: $2-$5 per day