Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Rental Car Business InsuranceCar insurance or proof of ability to pay for damages caused is required in every state. Business owners need to decide how best to make sure they and the business are protected when using a rented car for business purposes.

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For a majority of drivers, the insurance they have for their own cars usually provides sufficient cover for the typical rental vehicle. This, however, is for personal pleasure purposes and does not cover a car that is rented for business purposes.

Car Rental Insurance Types

There are four basic insurance types offered by most car rental firms that drivers need to be familiar with.

  • Collision Damage Waiver (CDW) or Loss Damage Waiver (LDW)- This waiver relieves the renter of any financial responsibility in case a rented vehicle is damaged in an accident, by vandalism, or is stolen.
  • Supplemental Liability Insurance (SLI)- This provides the driver additional liability coverage of up to one million dollars.
  • Personal Accident Insurance (PAI)- This pays for medical expenses of all the occupants of the rented vehicle. This is really not needed as most of the renting firms are already covered by personal health policies or travel policies.
  • Personal Effects Coverage (PEC)- This policy pays in case personal belongings inside the rented vehicle are damaged or stolen. Once again, this duplicates coverage already provided by majority of the renters under their own insurance policies. CBS News discusses the wisdom of this type of coverage here.

Rental Car Business Insurance Is Necessary

It is a common sales pitch for the auto rental companies to ask if you want to protect yourself in case of an accident. The fact of the matter is that CDW is as expensive as the coverage, it is paid for on a daily basis, and it is not insurance in the true sense of the word. That’s not to say it does not have value.

The Collision Damage Waiver is just an agreement between the car rental agency and the person renting the car that says the driver will not be liable for damages resulting from an accident.

However, you do need to be well informed in order to make sure that you are fully covered and know your rights before deciding to buy a package or to refuse it.

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When CDW is a Good Idea

Do I Need Car Rental Business Insurance

It is possible that by turning down CDW, you could be sorry later. This is because car rental companies usually charge a driver involved in an accident more than just the repair cost.

In most cases, the contract signed requires the renter to pay for all lost revenue. This means that you may have to pay for the losses incurred by the insurance company while the vehicle was being repaired.

Additionally, you may be charged for diminution of value. This is the loss of value of the vehicle due to the accident. The company renting the car has your credit card information and these charges will just be added to the bill.

Personal Insurance Cover

If you have car insurance and it covers car rentals, regardless of whether it is pleasure or business, there will still be deductibles to deal with.

So who pays those? Does the business pay it or do they come out of your own pocket? If the company picks up the tab for deductible there is still the issue of your personal premiums going up for a number of years due to an accident. Also, your own insurance may not cover all the charges that the car rental company puts on the bill.

Rental Insurance Cover with Credit Card

When you rent a car using a personal or business credit card, the credit card company provides insurance for car rentals. Here again there are issues and rules on what is covered and what is not covered. These vary from credit card to credit card and from the various banks issuing the cards. You can read Nerd Wallet’s blog on whether or not this is a good idea.

Most of the time, credit card companies only provide secondary cover. This means that you must file a claim with your own company before the credit card company pays anything. Unless you want to use one of the few cards that provide primary coverage (where an accident does not have to be reported to your own insurance company to get paid) for your business car rental, you are stuck with your primary provider’s coverage.

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The Need for Rental Car Business Insurance

Get Car Rental Business Insurance With Credit Card

You need for insurance on your business rental car is going to be situation specific. A well informed business traveler may be better off by just buying CDW or renting a car with a credit card that has primary coverage. This way, your own insurance does not come into the picture at all. 

Some cards automatically have free primary CDW coverage up to a specified limit, while other types of cards offer special packages. These packages allow you to be covered with CDW for up to 42 days per rental by paying an amount that is roughly equal to the amount you would pay a car rental company per day. Other cards allow you to convert their secondary CDW coverage to primary car insurance coverage by paying extra.

When CDW, LDW or physical damage waiver is taken, the car rental company gives up the right to recover losses from the renters. Just remember that damage to someone else’s vehicle is not included. It is essential that sufficient car rental business insurance is in place to protect all parties involved in an accident. When renting a vehicle for business purposes, it is important to be informed and if in doubt, better to have the insurance than regret it later.

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