Getting the most bang out of your insurance buck
A client called the other day to let me know he was going on a business trip, and asked whether or not he should buy the rental car company’s Physical Damage Waiver, or just add Hired Car Physical Damage to his business auto policy. I explained to him that while the Hired Car Physical Damage would provide coverage if the rental car sustained damage, it would not address three key provisions of the rental car contract – replace cost valuation, loss of use and diminution of value.
The commercial auto policy uses the actual cash value method if a car is totaled, which is the cost when new less depreciation. This can be a significant difference from the replacement cost of the vehicle.
With regard to loss of use, I’ve never seen an insurance company pay for this as there is no provision in the business automobile policy that would grant such coverage. Loss of use means the rental car company would have to have every other car they have in that category rented in order to suffer a monetary loss by not being able to rent the vehicle damaged in the collision.
With regard to diminution of value, most rental car contracts want to recoup the loss they will incur upon sale of the rental car when it is time to remove it from the fleet. The fact that the car was involved in a crash must be disclosed to the buyer, and the sales price will be reduced as a result.
Due to the above uncertainties, the safest course of action is to always purchase the Physical Damage Waiver from the rental car company.