Understanding Rental Car Insurance for Business: Name Controversies and Essential Coverage Explained

Renting a car for business use involves more than just picking a vehicle and signing a contract. One of the most confusing aspects is understanding how insurance works, especially when it comes to whose name the rental should be under and what coverage is truly necessary. Many business owners wonder if rental cars should be rented under the business name or the employee’s name. They also ask whether having hired and nonowned auto insurance means they can skip buying liability and physical damage coverage from the rental company. This post breaks down these questions and explains what coverage you might miss if you decline the rental company’s insurance.

Should the Rental Car Be Under the Business Name or Employee Name?

When renting a car for business purposes, the name on the rental agreement matters for insurance and liability reasons. Here’s what to consider:

• Renting Under the Business Name

Renting the car under the business name is often the safest choice. This approach clearly ties the rental to the company, which can simplify insurance claims and liability issues. It also helps when the vehicle is used by multiple employees, as the rental agreement covers the business rather than an individual.

• Renting Under the Employee Name

Sometimes, employees rent cars in their own names, especially if the rental is for a short trip or if the company does not have a corporate account with the rental agency. In this case, the employee’s personal insurance and the company’s hired and nonowned auto coverage usually apply. However, this can complicate claims if an accident occurs, as the rental agreement and insurance may not align perfectly.

• What Rental Companies Prefer

Rental companies typically prefer the renter to be the driver or the person responsible for the vehicle. If the rental is under the business name, the company may require a corporate credit card or additional documentation.

Key takeaway: Renting under the business name provides clearer protection and reduces confusion during claims. If employees rent under their own names, ensure your business insurance covers hired and nonowned autos adequately.

What Is Hired and Nonowned Auto Coverage?

Hired and nonowned auto insurance is a type of commercial auto insurance that covers vehicles your business rents, leases, or borrows but does not own. It also covers employees using their personal vehicles for business purposes.

• Hired Auto Coverage

Protects your business when you rent or lease vehicles. It typically covers liability for bodily injury and property damage caused by the rented vehicle.

• Nonowned Auto Coverage

Covers liability when employees use their personal vehicles for business tasks.

This coverage is essential for businesses that rely on rental cars or employee vehicles but do not own a large fleet.

Should You Buy Liability and Physical Damage Coverage from the Rental Company if You Have Hired and Nonowned Auto Coverage?

Many business owners assume that having hired and nonowned auto insurance means they can skip the rental company’s insurance. This is not always true.

• Liability Coverage

Your hired and nonowned auto policy usually covers liability, but limits and terms vary. Rental companies often require proof of adequate liability coverage before renting. If your policy limits are low, you might want to buy supplemental liability insurance from the rental company.

• Physical Damage Coverage

Hired and nonowned auto insurance often excludes or limits physical damage coverage for rental vehicles. This means damage to the rental car itself may not be covered or may have a high deductible. Rental companies offer collision damage waiver (CDW) or loss damage waiver (LDW) to cover physical damage.

• Gaps in Coverage

Without purchasing physical damage coverage from the rental company, your business could face large out-of-pocket expenses if the rental car is damaged or stolen.

Example: A company rents a vehicle for a sales trip. The employee has hired and nonowned auto coverage with $100,000 liability limits but no physical damage coverage. The rental car is involved in an accident causing $5,000 in damage. The company’s insurance may cover liability but not the repair costs, leaving the business responsible for the damage unless they purchased CDW from the rental company.

What Coverage Is Not Included If You Decline Insurance from the Rental Company?

Declining the rental company’s insurance can leave your business exposed in several ways:

• Collision and Comprehensive Damage

Damage to the rental car from accidents, theft, vandalism, or natural disasters may not be covered by your business insurance. This can lead to costly repairs or replacement fees.

• Loss of Use Charges

Rental companies often charge for the time the car is out of service due to damage. This charge is usually not covered by hired and nonowned auto insurance.

• Administrative Fees

Some rental companies add administrative fees for processing damage claims. These fees are typically not covered by your insurance.

• Supplemental Liability Protection

Your hired and nonowned auto policy may have liability limits that are lower than what the rental company requires. Declining supplemental liability insurance could expose your business to lawsuits or claims exceeding your coverage.

• Personal Injury Protection and Medical Payments

Rental company insurance often includes coverage for medical expenses or personal injury protection, which may not be included in your business policy.

Practical Tips for Managing Rental Car Insurance for Your Business

• Review Your Business Insurance Policy

Understand what your hired and nonowned auto coverage includes and its limits. Ask your insurance agent for details specific to rental vehicles.

• Consider the Rental Location

Insurance requirements and coverage can vary by state or country. Some places require you to buy certain coverage from the rental company.

• Use Corporate Rental Accounts

Setting up a corporate account with rental agencies can simplify billing and insurance verification.

• Train Employees on Rental Procedures

Make sure employees know whether to rent under the business or their own name and understand the insurance options.

• Evaluate Risk and Cost

Sometimes buying the rental company’s insurance is cheaper and less risky than relying solely on your business insurance.

Summary

Renting cars for business use involves careful consideration of whose name the rental is under and what insurance coverage is necessary. Renting under the business name usually offers clearer protection and simplifies claims. Hired and nonowned auto insurance covers liability for rental vehicles but often excludes physical damage, loss of use, and administrative fees. Declining the rental company’s insurance can leave your business exposed to significant costs. Reviewing your insurance policies, understanding coverage gaps, and making informed decisions about supplemental insurance can protect your business from unexpected expenses.