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No matter what kind of small business you run, getting the right insurance coverage is essential to protecting your company from the unexpected — whether an accident, natural disaster or lawsuit. However, when you own a business that poses a greater daily risk — like a car rental business — comprehensive small business insurance is even more important and often more complex.
In this guide, we’ll explain everything you need to know about car rental business insurance — including the types of insurance you may require, where to find the best policies and how much commercial fleet insurance will cost — so that you have all the insurance information you need to adequately protect your business.
Determining what kind of insurance you need
If you’re starting a car rental business, you know that every decision you make is a multi-step process — when cars are involved, there are more costs, licenses and space required to get everything set up. Unfortunately, your business insurance is no different.
Before you begin to think about what kind of car rental business insurance you need, the first step you’ll want to take is to evaluate your inventory. How many cars do you have? What kind of cars are they? How much are they worth? Do you only own standard cars, or do you have other types of vehicles in your fleet?
Answering all of these questions will help you start your search, as the specifics of your car rental business will largely dictate what kind of insurance you need, how much it will cost and the best providers for you to consider.
This being said, overall, the car rental business insurance you’ll need can be broken up into two overarching categories — general business insurance and commercial fleet insurance.
General car rental business insurance
First, your car rental business will need insurance to protect the business itself — a fleet of vehicles aside. As with all businesses, the specific types of insurance within this category will depend on your individual operation; however, you’ll likely need some or all of the following:
General liability insurance: All businesses should have general liability insurance. This insurance policy will protect your business from third-party claims of bodily injury, property damage or advertising injuries. Overall, your general liability insurance should cover your car rental business if a third party is injured in an accident involving one of your rental cars.
Commercial property insurance: Although commercial property insurance doesn’t typically cover the damage or loss of commercial vehicles, it will cover damages, loss or theft of any other property or equipment your business owns.
Business interruption insurance: This type of insurance, often also called business income insurance, covers income that you lose as a result of a disaster that forces you to slow or stop operations. As an example, if a storm destroyed your office and you couldn’t rent out your cars until the office was repaired, business interruption insurance would cover your loss of income.
Workers' compensation: If you have employees, you’re required, by law, to have workers' compensation insurance. Worker's comp will cover your employees if they’re hurt on the job — paying medical expenses and a portion of their salary while they’re out of work.
Excess liability insurance: Excess liability insurance typically is applied to a general liability policy, increasing your coverage limits in the case that you surpass the amount on your regular policy. With a car rental business, which generally poses more risk than other businesses, excess liability insurance might be particularly useful to have.
For all of these types of general car rental business insurance, you might consider bundling your policies into a business owner's policy, or BOP, to save on costs. Typically, a BOP combines general liability insurance and commercial property insurance, but can also include business interruption insurance or other policies, depending on the provider.
You should be able to purchase these insurance policies from any insurance company that offers commercial or business insurance. However, you might also choose to purchase them from your commercial fleet insurance provider (if available), as we’ll discuss in greater detail below.
Commercial fleet insurance
The next overarching type of insurance you’ll need for your car rental business is commercial fleet insurance. Your commercial fleet insurance will be the policy that actually protects the core of your business — your cars and vehicles.
This being said, most businesses with company vehicles only need commercial auto insurance, which protects them, their employees and the vehicle from damages or claims that occur as a result of the vehicle’s use. Although your commercial fleet insurance will likely have similar coverage parameters (and will, in fact, cover you and your employees when driving your vehicles), by definition, this type of car rental business insurance is designed to accommodate businesses that have two or more vehicles that they use as an integral part of their daily operations.
With this in mind, commercial fleet vehicle insurance is largely a specialized policy and will require working with a company that provides this specific type of insurance. Plus, it’s important to note that most states will have a requirement for coverage — dictating the amount of coverage you must have as a rental car provider.
So, what should you look for in a fleet insurance policy for your rental car business? Although the coverage will ultimately depend on the provider, you’ll generally want to have some or all of the following included in your policy:
Liability: On top of your general liability policy, your commercial fleet insurance should include liability coverage that protects third parties from any bodily injury or property damage caused by your vehicles.
Medical payments: Medical payments coverage will pay the medical bills and expenses of anyone injured in an accident while they were in one of your cars, regardless of who was at fault.
Physical damage: This coverage protects you in the case of loss or damage to the cars in your fleet specifically.
Collision damage: Collision damage is usually part of physical damage and particularly covers loss or damages to your cars when they are involved in a collision or rollover.
Comprehensive coverage: Comprehensive coverage is also typically included as part of physical damage coverage. Comprehensive coverage accounts for any events that are not collisions or rollovers, such as theft, vandalism, fire, storms, etc.
Uninsured and underinsured motorist coverage: This covers your cars and drivers if they’re involved in an accident with another driver who has little or no insurance coverage. This coverage also protects your business in the case of a hit-and-run, where you have no information on the other driver.
Roadside assistance: If one of your cars breaks down, this coverage will pay for the cost of towing, repairs or other work needed to get the vehicle running again.
Once again, it’s important to remember that not all commercial fleet vehicle policies will look the same, so you’ll want to decide what features you want to be included when you’re talking to business insurance companies and see what they’re able to offer.
Plus, depending on your individual car rental business, you might be interested in adding on other related policies — like rental coverage, if you need to rent a replacement vehicle when one in your fleet is damaged; accessories coverage, to cover any GPS, radios or other equipment that’s installed in your vehicles; or garage liability to cover any day-to-day maintenance and repairs you make on your vehicles.
Finally, you might also choose to purchase what’s called “supplemental insurance” and upsell it to customers who rent your cars. Typically, there are three types of supplemental policies available within car rental business insurance:
Supplemental liability insurance: This coverage protects the vehicle’s driver in case they cause bodily harm or property damage to a third party.
Personal accident insurance: This coverage protects the vehicle’s driver and anyone else in the car in the case of accidental death or emergency medical services.
Personal effects insurance: This coverage protects the individual who rents your car in the event their personal property is stolen or damaged while they’re using the vehicle.
Ultimately, just as it’s up to you to decide what type of general rental car business insurance coverage you need, you’ll be responsible for determining the extent of coverage you need for your commercial fleet insurance.
Where to get commercial car rental insurance
Once you have a better sense of what your insurance needs look like — and what type of policies you may need — you’ll want to start your search for a provider. Most commercial insurance providers should be able to offer general liability insurance, commercial property insurance, etc.
When it comes to commercial fleet insurance, on the other hand, you may find that not all providers offer this kind of coverage. You’ll likely want to work with a company that is familiar with rental car businesses, as they’ll be able to provide the most comprehensive (and hopefully, most affordable) coverage. This being said, if you can find a provider that can get you all the business insurance products you need, you’ll probably find working with this company to be the simplest and most efficient solution.
With all of this in mind, when you start your search for car rental business insurance, you can either explore different companies yourself or work with an insurance broker. Unfortunately, due to the specialized and variable nature of commercial fleet vehicle insurance, you probably won’t be able to find an online insurance marketplace that allows you to quickly and easily compare your options.
Therefore, if you choose to hire an insurance broker, you’ll want to look for an experienced professional who has worked with car rental businesses in the past. You may talk to other business owners or contact your local chamber of commerce for broker recommendations. It’s important to remember, however, that using an insurance broker will come at a cost — but may be worthwhile to have a professional guide you through your options.
If you choose to compare insurance companies on your own, you’ll want to look for providers that not only offer commercial car rental insurance but also have experience with fleet insurance in particular.
As an example, you might consider Allstate — which in addition to their general business insurance offerings, provides specific coverage options for rental service businesses, including auto coverage. Nationwide also offers comprehensive commercial fleet coverage through their auto policies and also provides dedicated solutions for auto service and repair businesses.
With these types of providers, you can either find a local agent in your area or call a representative to discuss the commercial insurance your rental car business needs.
Cost of car rental business insurance
At this point, you should have an understanding of what kind of commercial insurance your rental car business needs and where you can get it — you may still be wondering, however, about costs.
Ultimately, the cost of your insurance policy will largely depend on a number of factors, including your business location, size and a number of employees. Next, the amount of coverage you choose and the types of policies you need will also affect your costs. Generally, the more policies you require and the more comprehensive the coverage, the higher your costs will be.
If you can bundle some of your more general insurance policies into a BOP, or other customized policy, you may be able to save on costs by paying a single premium instead of multiple. For reference, the cost of a business owners policy averages around $1,200 per year, according to the online insurance marketplace Insureon.
Commercial fleet insurance cost
Then, when it comes to your commercial fleet-related policies, the annual price you pay will depend on some of the factors listed above, but will also heavily depend on the makeup of your fleet. Therefore, your costs may be affected by:
The number of cars in your fleet.
The type of vehicles you have (trucks, for example, will be more expensive to insure than passenger cars).
The condition, age and value of your vehicles.
Any equipment or accessories your vehicles have.
Additionally, your commercial fleet insurance cost will also depend on the extent of your coverage, the limits of your coverage, the number of policies you have and the provider you work with. For reference, according to a 2017 survey by Insurance Trak, the average cost of commercial auto insurance was $1,982.
This being said, it’s difficult to determine how much, on the whole, car rental business insurance will cost. However, compared to many other small businesses, you’ll likely find your insurance costs on the higher end of the spectrum, especially considering the risks associated with rentals and driving. It’s for this reason that most car rental businesses pass on the cost of commercial fleet insurance to their customers.
Once you know how much your insurance will cost on an annual basis, you may break the cost down to a per-day, per-vehicle rate, so you have a sense of what you should charge your customers to cover these costs. You may incorporate insurance costs directly into your rental car prices, or you may add a separate insurance charge to the bill of each vehicle you rent.
Like many parts of starting and running a car rental business, it may take some time to figure out your exact insurance needs, costs and what provider will work best for your company.
As we mentioned, you may find it useful to work with an insurance professional, either an agent or broker, to help you sort through what you need and what your options are. Along these lines, you’ll also want to ensure that you receive quotes from multiple providers to determine which one can offer you the most affordable rates with the most comprehensive coverage.
Finally, it’s helpful to remember that there are some actions you can take to save money on small business insurance, including combining policies, implementing safety standards and reevaluating your policies on an annual basis. Ultimately, although finding car rental business insurance may seem like a tedious process, your business will be better protected (and will hopefully save money in the long run) with the right coverage in place.
This article originally appeared on Fundera, a subsidiary of NerdWallet.