What You Need to Know When Renting a Car for Business

If your work involves travel, you may at one point or another find yourself needing to rent a car for business.

But generally, when you rent a vehicle it is under one individual name, so renting in a business name can get tricky.

We know it first hand. At Berry Insurance, we’ve had plenty of our commercial auto clients ask questions about renting vehicles, and we’ve actually had to research many of the answers ourselves.

In this article, we will sum up everything we’ve learned about renting a car for business so you can feel confident navigating the process knowing your insurance is covering you.

Whose name to rent the business vehicle in:

One of the most common questions we get is whose name they should put on the rental contract.

If you want to rent a car for business, our advice is to first try to set up a corporate account with the rental car company in the name of the business. 

If the car rental company does not allow that, the employee driving the vehicle can rent the car with a company credit card or company checking account. If you are renting on behalf of your employee, make sure you add the employee’s name to the agreement as an approved operator. 

Know the terms of your car rental agreement:

We know how daunting it can be to read a full contract, and in the pressure of trying to get things done quickly, you might just be tempted to skim and sign your car rental agreement.

However, it is important that you fully read the terms of the contract. But just reading it isn’t enough. You should make sure you actually understand all of the terms. If not, it may be easy to violate the contract, or not have the insurance coverages you need to protect you.

If there’s anything in the contract you’re unsure of, have your insurance agent review it for you to make sure you are properly protected, especially if you rent vehicles frequently.

Make sure your insurance is up to date:

Your auto policy is there to protect you from spending money on out-of-pocket claims, so the last thing you would want is to end up stuck with an expensive bill after getting in an accident with a rental car.

Before you rent a vehicle for business use, you should make sure your commercial auto policy is adequately protecting you for that type of use. We suggest you make sure you check in on or are aware of the following four items.

1. Make sure you have “Employees as Insureds” and “Autos Rented by Employees” endorsements on your commercial auto insurance policy. These may be separate endorsements on your policy, or may be included in a carrier’s enhancement endorsement, and may also be called slightly different name variations. The Employees as Insureds endorsement adds employees as insureds while using their personal vehicle on company business. The Autos Rented by Employees endorsement covers employees for the vehicles they rent for business.
   
   
2. Make sure you have “Hired and Non-Owned Auto Liability coverage.” This is very inexpensive coverage that will provide liability coverage when using vehicles the business does not own - like those you rent, or that your employees personally own and use for business errands.
   
   
3. Make sure you have “Hired Physical Damage Coverage”, which covers damage done to a vehicle while you rent it. Keep in mind though, in order for the coverage to extend to a rental, you need to also have comprehensive coverage on the vehicles your company owns. This coverage endorsement also does not provide replacement cost coverage. The insurance will pay the lessor of the actual cash value at the time of the loss or the amount stated on the policy for this coverage, and it is subject to your deductible. Some insurance carriers also max the coverage out at $50,000, so be sure to check to see what you are eligible for. You should have an internal policy as to the type of vehicle your employee’s can rent, so they don’t rent high value vehicles that could incur higher damage costs. If you do not have Hired Physical Damage Coverage, you should ALWAYS buy the damage waiver coverage from the rental company.
   
   
4. Keep in mind, your auto policy only provides liability coverage in the U.S. If you or your employees will be renting a vehicle in another country, and for work purposes, you’ll want to make sure your policy has a “Hired Auto - Coverage Territory” extension. This will extend liability worldwide.

To learn more about commercial auto insurance, you can read this article: What is Commercial Auto Insurance? Do I Need it?

Take pictures before and after rental:

Another thing to keep in mind: we always recommend you or the employee driving the car take pictures both when picking up the vehicle and when returning the vehicle.

It might sound overly cautious, but trust us: we’ve heard of rental car companies claiming damages after you’ve returned the vehicle. 

If you have pictures both before and after you drive the vehicle, it will help with your defense if the rental company claims damage.

Be prepared to pay for any loss of use:

While your commercial auto policy would cover an accident in a rental car, it may fall short when it comes to loss of use coverage.

Loss of use is a coverage that provides either a rental vehicle or financial reimbursement for transportation costs incurred while a vehicle is being repaired from a claim.

If the rental company claims loss of use after an accident, your commercial auto policy likely won’t give much, if any, coverage. We’ve seen some insurance carries exclude it completely, and others provide up to $500-$1,000. 

If you do not have loss of use, you could be stuck paying. For example, if a rental company generally charges $50 per day to rent out the vehicle and it is out of commission for 30 days, that is potentially $1,500 in revenue the rental company is no longer getting, so if your commercial auto policy doesn’t cover loss of use on rentals, you may be stuck paying that.

But if this happens to you, you may have another option.

Your credit card could actually provide more coverage, which is why we always recommend checking with your credit card company, and renting with a company credit card whenever possible.

Navigate your business rentals with confidence

Understanding your commercial auto insurance policy isn’t easy in the first place, and when it comes to how it applies to rental vehicles, it only gets more complex.

After familiarizing yourself with the steps above, you should better understand the business rental process, and feel more confident when renting vehicles for company use.

But we do have one more tip. If you find your business renting vehicles for certain employee drivers often, it could make sense for you to actually supply them with a company-owned vehicle. If you think it could be an option for you, check out this article: What You Need to Know When Supplying a Company-Owned Vehicle to an Employee.