Choosing the right insurance company for your business can be more complex than is readily apparent. For example, the lowest price may not be the best value. As insurance agents we understand that the price of a policy is important however, so is financial stability, service and reputation. We recommend looking for financially strong companies that can offer products that meet your needs at a competitive price.
When purchasing a policy based on price alone, you could suffer consequences ranging from unpaid claims due to poor service to insolvent carriers resulting from under-pricing.
When considering the best policy for you, consider the following:
Type of Product: The type of policies purchased by most business entities include but are not limited to property, general liability, umbrella and director & officers (D&O).
(Workers Comp and Commercial Auto will be discussed in a future article)
When shopping for insurance coverage, be ready to provide information about the type of company you need insurance for along with any questions you may have so that your insurance agent can guide you in making an informed decision on your coverage options.
Price: Premiums paid for any insurance policy is an important consideration. When business owners have been surveyed, over 50% felt it was "very important". Like any other purchase, price is relevant to value.
Variables that influence the cost of an insurance policy include liability limits, deductibles, where the insured property is located, characteristics of the property, type of business...the list goes on.
Every company applies their underwriting and pricing criteria based on these factors, with premiums varying from insurer to insurer. When your agent provides you quotes, they'll offer an explanation of the price differences.
Service & Reputation: A reputation for good customer service, efficient and friendly claims management and the ease of doing business with often ranks toward the top of the list when shopping for insurance. When it comes to claim response, insureds are looking for fairness, speed of response and speed of payment.
Industry Expertise: Your agent will place you with a company that specializes in your industry. Choosing a company that is inexperienced could negatively impact your coverage and service.
Licensing: Not all insurance companies are licensed to write coverage in every state. Your agent will recommend an "admitted carrier" for your state. This means that the company is licensed and regulated by the state. When coverage is difficult to find, your agent will work with insurers that write surplus lines. Surplus lines are written by "non-admitted" carriers. They are not licensed to write coverage in the state but can write coverage for policies that most admitted carriers will not cover. It is important to note that these carriers are unregulated by the state, freeing the insurer of any premium and policy form regulations.
The process of purchasing insurance for your business can be long and at times feel complicated.
Look for an agent who has the experience and expertise to guide you in making the right decision on your insurance coverage.
Drexal Harris has been a licensed insurance agent in Florida for over 40 years. His agency, Baker-Harris Insurance is one of the oldest in Tallahassee specializing in all forms of insurance.
Information for the above article was provided by Zurichna.com and naic.org
Friday, April 13, 2012
Tuesday, April 10, 2012
Rental Car Coverage
As summer approaches, our office begins handling the daily call(s) in regards to rental cars and whether the insurance should be purchased. David Thompson of the Florida Association of Insurance Agents (FAIA) had published an article addressing rental car coverage and we have been granted permission to re-publish. Although the following article was written a few years ago, the information provided is still valid.
Rental Car Coverage and your Personal Auto Policy (PAP)
A very common question posed to insurance agents by a client is, "Should I buy that rental car insurance coverage?" If only there was a simple answer to this question! The quickest (and perhaps safest) answer an agent can give is, "Yes, buy the coverage." It takes a complete understanding of the question, as well as knowledge of the coverage provided by a Personal Auto Policy (PAP) in order to answer the question. Plus, the agent needs to know what coverages may or may not be provided by the rental company's collision/loss damage waiver, and perhaps there is even coverage provided by a credit card company. Finally, rental companies sell as many as five or six different types of coverage or waivers so the question may not be, "Should I buy the coverage," but, "Which coverages, if any, should I buy?"
First a few disclaimers. Information here can't possibly account for every situation, and specific coverage questions should be analyzed individually. Next, this discussion is based on the 1998 and 2005 versions of the Insurance Services Offices PAP. Many companies may use a modified version of this or earlier policy editions, and some companies may have their own proprietary forms that provide little or no coverage for rental vehicles. (Answers would differ greatly if the 6/94 PAP edition were used to analyze coverage.) While many states have similar laws, this analysis is based on Florida laws; other states may differ. Finally, a reminder that no coverage exists under the PAP outside the United States, Canada, Puerto Rico, and U.S. territories and possessions.
The PAP provides a variety of coverages for an individual who rents a vehicle in both personal use and business use situations. To best answer the "should I buy" question, each coverage will be addressed individually.
LIABILITY: In simple terms, liability coverage follows the named insured, resident spouse, and "family members" while they use any vehicle, including a rental vehicle. (The policy states coverage is provided for the "ownership, maintenance or use of any auto or trailer.") If the rental is for personal use, coverage applies for the rental of any vehicle with four or more wheels that is designed for road use, even a U-Haul moving truck. Liability coverage provided by the PAP would (in most cases) be excess coverage, applying after any coverage that might be provided by the rental firm. (However, most rental contracts in Florida make the authorized renter/driver's auto liability coverage primary up to a certain limit, meaning an at fault accident is paid first from the renter's auto policy.) If the purpose of the rental is business use then liability coverage applies only for a private passenger automobile, pickup, or van --- but not for a vehicle such as a "box truck" or motor home. Extended rentals, such as those over perhaps 15-20 days should be referred to the company to determine if the "furnished or available for regular use" exclusion applies. The "Extended Non-Owned Coverage" endorsement (PP 03 06) is available if the company indicates a coverage problem in this instance.
MEDICAL PAYMENTS: Coverage is essentially the same as described for liability coverage with one exception. Under the 1998 form, if the client rents a pickup truck or van (even a mini-van) for business use there is no medical payments coverage provided by the PAP. The 2005 form provides coverage in this situation automatically. Should there also be medical payments coverage provided by the rental firm, (an unlikely event) then medical payments coverage provided by the PAP will be excess over that coverage.
PERSONAL INJURY PROTECTION (PIP): Each of the dozen or so states with a PIP law is different and this discussion involves only Florida PIP. As long as the client rents a vehicle with four or more wheels that is designed for use on the road, then PIP coverage applies while the client, spouse, and family members are anywhere in Florida. Should an injury occur, the client would get his own PIP and no other PIP. (If the client does not own a Florida "PIP vehicle" then he would get PIP of the rental firm.) PIP coverage out of state is not provided in a rental vehicle. The only time that PIP coverage applies out of state is when the insured, spouse, or family member is occupying their own automobile.
UNINSURED MOTORIST: Again, this discussion pertains only to Florida, as each state is different. The short answer here is that there are no coverage issues with UM coverage. It does not matter if the client has stacked or non-stacked UM --- they can collect UM while occupying the rental vehicle. Coverage applies in state or out of state; personal or business use; in any type rental vehicle. Should the rental firm carry UM (again a very unlikely event), then the UM coverage provided by the PAP would be excess coverage.
PHYSICAL DAMAGE COVERAGE: Finally, the REAL reason the client is calling likely is, "If I wreck the car itself will my policy pay?" The client must have at least one auto insured with collision and other-than-collision (comprehensive) coverage for the rental vehicle to be covered. Coverage applying to a rental vehicle is the "broadest coverage" of any auto insured on the PAP. If the client has a policy providing only liability, medical payments, PIP, and UM, there is no coverage for the rental vehicle itself in the event of damage. The type of vehicle rented is of concern too, since physical damage coverage applies only for private passenger autos, pickups, and vans. Not covered are larger vehicles such as "box trucks" which means that the U-Haul and Ryder type trucks rented by clients are not covered for physical damage. In such cases the client should be advised to purchase coverage from the rental firm. As long as a private passenger auto, pickup, or van is rented, coverage applies for both personal and business use, anywhere in the policy territory. (Again, note there is no coverage in common vacation spots such as Mexico, Europe, and the Bahamas.) When coverage applies, it is subject to the deductible and all other policy conditions will apply. It's interesting to note that a damaged rental car is covered up to the actual cash value of the rental car without regard to what type vehicle the client owns and insures. For example, the client owns a seven-year-old Ford with an ACV of $2,500 and rents a $35,000 Lincoln. If the client wrecks the Lincoln causing a total loss, the PAP pays the $35,000 less deductible. (Note however there is a limit of $500 payable for damage to non-owned trailers in the 1998 form and $1,500 in the 2005 form.) There is coverage for "loss of rental use" imposed by the rental firm up to $20 per day with that amount increasable by endorsement. Coverage also applies for other "administrative charges" imposed by the rental firm. However, the total of loss of use charges plus administrative charges will be paid to a maximum of $600 unless the policy has been endorsed for a higher limit. Coverage provided by credit cards varies from card to card and agents should refer questions about coverage provided under the card to the issuing bank. Coverage is generally very limited and may not be nearly as broad as a client believes it to be.
So, all that being said should the client buy "the insurance" from the rental firm? For the sake of this discussion let's assume that the only "insurance" in question is the "collision damage waiver" typically offered at prices of $12.99 to $22.99 per day. Clients could rely on their own PAP for coverage to a damaged rental car, in which case they would be filing a claim under their own policy. (Note too, damage could be from a hit and run vehicle or damage to the rental car while it was parked at a shopping center.) Damage to the rental car would be paid by the PAP subject to the client paying the deductible, any loss of use charges over $20 per day, and any administrative expenses that (combined with loss of use charges) exceed $600. Additionally, the client has had to involve his or her own time, agent, and policy in covering the claim. Had the client chosen to purchase the "collision damage waiver" from the rental firm, he would (in many cases anyway) walk up to the counter, drop the keys down, and say, "Gee, I wrecked your car, I am so sorry. I need another car and, by the way, I bought your coverage."
Here are a few of the many reasons that clients are better off by purchasing the damage waiver offered by rental car firms:
BOTTOM LINE: The client is always better off to purchase the "loss damage waiver" coverage offered by the rental firm. Whether they choose to pay the often outrageous price for this coverage is, of course, their final decision.
~David Thompson, FAIA
September 2008
This article contains copyrighted information of the Florida Association of Insurance Agents (FAIA) and is used with permission. Please call Baker-Harris Insurance at 850-386-1420 if you have any further questions about this article. FAIA is not staffed to take consumer calls.
A very common question posed to insurance agents by a client is, "Should I buy that rental car insurance coverage?" If only there was a simple answer to this question! The quickest (and perhaps safest) answer an agent can give is, "Yes, buy the coverage." It takes a complete understanding of the question, as well as knowledge of the coverage provided by a Personal Auto Policy (PAP) in order to answer the question. Plus, the agent needs to know what coverages may or may not be provided by the rental company's collision/loss damage waiver, and perhaps there is even coverage provided by a credit card company. Finally, rental companies sell as many as five or six different types of coverage or waivers so the question may not be, "Should I buy the coverage," but, "Which coverages, if any, should I buy?"
First a few disclaimers. Information here can't possibly account for every situation, and specific coverage questions should be analyzed individually. Next, this discussion is based on the 1998 and 2005 versions of the Insurance Services Offices PAP. Many companies may use a modified version of this or earlier policy editions, and some companies may have their own proprietary forms that provide little or no coverage for rental vehicles. (Answers would differ greatly if the 6/94 PAP edition were used to analyze coverage.) While many states have similar laws, this analysis is based on Florida laws; other states may differ. Finally, a reminder that no coverage exists under the PAP outside the United States, Canada, Puerto Rico, and U.S. territories and possessions.
The PAP provides a variety of coverages for an individual who rents a vehicle in both personal use and business use situations. To best answer the "should I buy" question, each coverage will be addressed individually.
LIABILITY: In simple terms, liability coverage follows the named insured, resident spouse, and "family members" while they use any vehicle, including a rental vehicle. (The policy states coverage is provided for the "ownership, maintenance or use of any auto or trailer.") If the rental is for personal use, coverage applies for the rental of any vehicle with four or more wheels that is designed for road use, even a U-Haul moving truck. Liability coverage provided by the PAP would (in most cases) be excess coverage, applying after any coverage that might be provided by the rental firm. (However, most rental contracts in Florida make the authorized renter/driver's auto liability coverage primary up to a certain limit, meaning an at fault accident is paid first from the renter's auto policy.) If the purpose of the rental is business use then liability coverage applies only for a private passenger automobile, pickup, or van --- but not for a vehicle such as a "box truck" or motor home. Extended rentals, such as those over perhaps 15-20 days should be referred to the company to determine if the "furnished or available for regular use" exclusion applies. The "Extended Non-Owned Coverage" endorsement (PP 03 06) is available if the company indicates a coverage problem in this instance.
MEDICAL PAYMENTS: Coverage is essentially the same as described for liability coverage with one exception. Under the 1998 form, if the client rents a pickup truck or van (even a mini-van) for business use there is no medical payments coverage provided by the PAP. The 2005 form provides coverage in this situation automatically. Should there also be medical payments coverage provided by the rental firm, (an unlikely event) then medical payments coverage provided by the PAP will be excess over that coverage.
PERSONAL INJURY PROTECTION (PIP): Each of the dozen or so states with a PIP law is different and this discussion involves only Florida PIP. As long as the client rents a vehicle with four or more wheels that is designed for use on the road, then PIP coverage applies while the client, spouse, and family members are anywhere in Florida. Should an injury occur, the client would get his own PIP and no other PIP. (If the client does not own a Florida "PIP vehicle" then he would get PIP of the rental firm.) PIP coverage out of state is not provided in a rental vehicle. The only time that PIP coverage applies out of state is when the insured, spouse, or family member is occupying their own automobile.
UNINSURED MOTORIST: Again, this discussion pertains only to Florida, as each state is different. The short answer here is that there are no coverage issues with UM coverage. It does not matter if the client has stacked or non-stacked UM --- they can collect UM while occupying the rental vehicle. Coverage applies in state or out of state; personal or business use; in any type rental vehicle. Should the rental firm carry UM (again a very unlikely event), then the UM coverage provided by the PAP would be excess coverage.
PHYSICAL DAMAGE COVERAGE: Finally, the REAL reason the client is calling likely is, "If I wreck the car itself will my policy pay?" The client must have at least one auto insured with collision and other-than-collision (comprehensive) coverage for the rental vehicle to be covered. Coverage applying to a rental vehicle is the "broadest coverage" of any auto insured on the PAP. If the client has a policy providing only liability, medical payments, PIP, and UM, there is no coverage for the rental vehicle itself in the event of damage. The type of vehicle rented is of concern too, since physical damage coverage applies only for private passenger autos, pickups, and vans. Not covered are larger vehicles such as "box trucks" which means that the U-Haul and Ryder type trucks rented by clients are not covered for physical damage. In such cases the client should be advised to purchase coverage from the rental firm. As long as a private passenger auto, pickup, or van is rented, coverage applies for both personal and business use, anywhere in the policy territory. (Again, note there is no coverage in common vacation spots such as Mexico, Europe, and the Bahamas.) When coverage applies, it is subject to the deductible and all other policy conditions will apply. It's interesting to note that a damaged rental car is covered up to the actual cash value of the rental car without regard to what type vehicle the client owns and insures. For example, the client owns a seven-year-old Ford with an ACV of $2,500 and rents a $35,000 Lincoln. If the client wrecks the Lincoln causing a total loss, the PAP pays the $35,000 less deductible. (Note however there is a limit of $500 payable for damage to non-owned trailers in the 1998 form and $1,500 in the 2005 form.) There is coverage for "loss of rental use" imposed by the rental firm up to $20 per day with that amount increasable by endorsement. Coverage also applies for other "administrative charges" imposed by the rental firm. However, the total of loss of use charges plus administrative charges will be paid to a maximum of $600 unless the policy has been endorsed for a higher limit. Coverage provided by credit cards varies from card to card and agents should refer questions about coverage provided under the card to the issuing bank. Coverage is generally very limited and may not be nearly as broad as a client believes it to be.
So, all that being said should the client buy "the insurance" from the rental firm? For the sake of this discussion let's assume that the only "insurance" in question is the "collision damage waiver" typically offered at prices of $12.99 to $22.99 per day. Clients could rely on their own PAP for coverage to a damaged rental car, in which case they would be filing a claim under their own policy. (Note too, damage could be from a hit and run vehicle or damage to the rental car while it was parked at a shopping center.) Damage to the rental car would be paid by the PAP subject to the client paying the deductible, any loss of use charges over $20 per day, and any administrative expenses that (combined with loss of use charges) exceed $600. Additionally, the client has had to involve his or her own time, agent, and policy in covering the claim. Had the client chosen to purchase the "collision damage waiver" from the rental firm, he would (in many cases anyway) walk up to the counter, drop the keys down, and say, "Gee, I wrecked your car, I am so sorry. I need another car and, by the way, I bought your coverage."
Here are a few of the many reasons that clients are better off by purchasing the damage waiver offered by rental car firms:
- Loss settlement: The PAP provides actual cash value loss settlement. Many rental car firms hold the renter responsible for the "full value" of the vehicle, most likely as determined by the rental car firm.
- Diminished value: Many rental car contracts hold the renter responsible for the diminished value of a vehicle that has been damaged in an accident. The rental car firm determines this diminished value and the PAP does not cover diminished value.
- Deductible: The PAP has a deductible, typically ranging from $250 to $1,000. The insured is responsible for that amount, even if not at fault. For example, if an insured came out from a store to find the rental car damaged by a hit-and-run driver, the insured must submit the claim to his PAP and pay the deductible.
- Excluded vehicles: The PAP provides no physical damage coverage for a vehicle other than a private passenger auto, pickup, van, or trailer. Those who rent larger vehicles such as moving trucks and motor homes have no coverage under the PAP for damage to those vehicles. The value of these vehicles can easily exceed $100,000.
- Excluded drivers: There may be a driver exclusion form present on the PAP. By adding that person as a driver to the rental car contract and purchasing the damage waiver, coverage can be provided.
- Demand for immediate payment: The rental car firm may require immediate payment from the renter if a vehicle is damaged, perhaps by charging their credit card for an estimated amount. It may take several weeks, or longer, for the PAP to make payment.
- Loss of use charges: While the PAP does provide coverage for loss of use charges at $20 per day to a maximum of $600, it's seldom that a rental car is that inexpensive. If the damage waiver is declined, the insured is responsible for excess loss of use charges.
- Administrative charges: Rental car firms often impost an administrative charge when a vehicle is damaged. The PAP covers these charges, but only up to a limit of $600, which is a combined total for loss of use and administrative charges.
- Policy territory: As stated earlier, there is no coverage under the PAP for popular vacation locations like Europe, Mexico, and the Caribbean. Those who rent in locations like these certainly should purchase the damage waiver.
- PAP surcharges: Submitting a claim (even one for an unattended parked vehicle that was damaged) under the PAP may result in a premium increase. While any claim involving a moving vehicle and/or possible third party injury or damage claim should always be reported, purchasing the damage waiver may allow the customer to avoid submitting a claim for the unattended vehicle type claim.
- Hail, wind, etc.: Most rental car contracts hold the renter responsible for any damage to a vehicle, even an act of God claim. Imagine coming out to find a rental car significantly damaged by hail, only to find the rental car firm saying, "You owe us the money."
- Life simplification: Admittedly, the cost of the damage waiver could be viewed as "highway robbery" by some. That cost must be weighed against the ease of turning a damaged rental car. Simply drop the keys down and walk away, leaving the rental car firm with the problem.
BOTTOM LINE: The client is always better off to purchase the "loss damage waiver" coverage offered by the rental firm. Whether they choose to pay the often outrageous price for this coverage is, of course, their final decision.
~David Thompson, FAIA
September 2008
This article contains copyrighted information of the Florida Association of Insurance Agents (FAIA) and is used with permission. Please call Baker-Harris Insurance at 850-386-1420 if you have any further questions about this article. FAIA is not staffed to take consumer calls.
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