Options to Secure Coverage for Short-term Car Rentals

When members want to rent a vehicle for short-term use, they have a few options for securing coverage on that vehicle. No one option is better than another, so the organization should determine which is best for its operations.

Option 1: Employees Rent Vehicles, Use Personal Insurance

The first option is for the member’s employees to rent vehicles in their own names and use their personal auto insurance to cover the vehicle. The member could reimburse employees for expenses associated with the rental.

In this scenario, the employee’s personal auto insurance is primary and applies first. With rental vehicle usage for member business purposes, MCIT’s liability coverage would apply on an excess basis.

Members should communicate to employees that their personal insurance is first to respond if an incident occurs.

Option 2: Purchase Coverage from Rental Company

Employees could rent vehicles in their names and purchase liability and physical damage coverage directly from the rental car company. Again, the member could reimburse employees for these expenses. This option transfers the risk to the rental company and makes the rental company insurer primary in the case of an accident.

MCIT realizes that this option may not be cost effective for the member, but it is a viable strategy to transfer risk without employees’ insurance being implicated.

Option 3: MCIT Primary Coverage

This option is not commonly pursed, but MCIT coverage can be primary for a short-term rental when the rental is in the member entity’s name (not the employee’s name) and the vehicle is scheduled with MCIT. The vehicle can be added to the schedule through the member portal form (include the date, location of the rental and name of rental company).

However, rental companies may not allow vehicles to be rented in the entity’s name if the member does not already have a business account set up with the rental company.

Option 4: Establish Business Account with Rental Company

If short-term auto rentals are common for the member, it may be worth setting up a corporate account with a rental company. This allows the member to rent vehicles in the member entity’s name, not the individual employee’s name.

The State of Minnesota has a contract with at least one major rental car company, and Minnesota public entities are able to access this contract to set up corporate accounts. Rental companies may build insurance coverage into the account contracts at little to no additional cost, which effectively and affordably transfers the risk to the rental company.

Option 5: Use Fleet Vehicles, Taxis, Rideshares

Members should also consider whether they need to rent vehicles. Acceptable alternatives may be having employees drive the entity’s fleet vehicles or using taxi or ride share services. The member could then reimburse employees for taxi or rideshare costs.

More Information

MCIT offers a number of resources that discuss auto coverage provided through MCIT. Members can access these in the Resource Library.

Risk management consultants are also happy to discuss coverage questions with members. Reach them at 866.547.6516.