Insurance for hired, borrowed or non-owned vehicles

 

Anytime you use a car, van or truck that you or your company does not own, you are advised to check that the insurance for hired, borrowed or non-owned vehicles will cover you in the case of any claim.

There are so many possible exceptions in all standard auto insurance policies that there is the real possibility that any accident, or theft of the vehicle, could leave you personally exposed to claims for recovery of all associated amounts.

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Insurance for hired, borrowed or non-owned vehicles

If you are using any vehicle that is not your own, you should consider the risks.

The three most common types of insurance coverage are detailed below. It is essential to know the difference between them in order to make an informed decision.  

Liability insurance covers injuries and property damage to other people that occur as a result of the driver’s fault, up to the limit for each policy. Liability covers a specific event known as “strict liability.” This means that an accident caused by another driver is covered if you have full insurance coverage.

Strict liability insurance is a type of insurance that may be required by law in most jurisdictions. It covers the owner of the vehicle and any passengers or pedestrians who may be injured in an accident caused by the vehicle.

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Strict liability insurance for vehicles is typically required for anyone who rents a car, borrows a car, or hires a car for driving purposes. Liability insurance typically covers bodily injury, death, and property damage when they occur as a result of anything happening during or after a trip in the car.

This type of coverage also protects the driver and passengers if they are injured in an accident with someone who is not driving the vehicle, for example, if they are riding as passengers.

Collision insurance covers damage to the vehicle you are driving while on the road, but not damage done to someone else’s car. For example, suppose you hit a parked vehicle and cause damage to it. In that case, your collision insurance will cover the cost of that damage.

However, consider you rear-ended someone and caused them to crash their vehicle. In that case, your collision insurance would not cover the damage to their car.

Sometimes collision insurance does cover damages done to another person’s car. This is called double coverage and might only be available for those who specify comprehensive coverage on their policy.

Comprehensive insurance will cover damages not resulting from an accident or collision like theft or vandalism.

Understanding the primary differences between hired, borrowed and non-owned vehicles

There may be some confusion because all of these fall under the same umbrella of cars that don’t belong to the person driving them.

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While most people are familiar with the idea of auto insurance, not many know about the difference in risks between owned and non-owned cars.

In general, when you buy a car, you own it. When you rent, lease or borrow a car you do not own it. Businesses could use non-owned vehicles as they need them for their daily purposes. This is where non-owned vehicle insurance comes into play.

Non-owned vehicle insurance covers damage or loss to the car if you have borrowed it from someone else for your business needs, or if it’s leased or rented. Suppose something happens to the vehicle during that time period.

In that case, you need the proper insurance to provide protection from third-party liability claims in case of an accident with another person’s car or property damage caused by the driver.

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But there are fundamental differences regarding your liabilities and risks in case of an accident or theft, so we will take a bit of time to explain this in more depth.

Suppose you are using a vehicle in business and you rent it, or you borrow a car from a friend or family member. In that case, you must understand what their insurance company’s policies are in terms of non-owned vehicle liability coverage. 

Suppose you are driving a non-owned vehicle and meet with an accident. In that case, the liability insurance coverage provided by the rental company will be useless because it only covers injuries to other people, not yourself. You must have your own insurance for any vehicle you drive. 

When you borrow or lease a vehicle for business purposes, you must ensure that you are covered with insurance. This is because the owner will not be held liable for any damages that may happen because of its use by you, or for injuries to third parties. 

Rental Car Insurance 

There is a primary difference between rented vehicle insurance and the requirements for borrowed or non-owned vehicles.

Rental car insurance is a type of coverage that protects you from liability in case someone gets injured or damaged in a car accident caused by your rented car. 

A rental company usually provides renters with a liability insurance contracts when renting a car. In almost all states, they are required by law to provide this coverage. They can be penalized for giving inadequate coverage.  

As the driver, you have the duty of care (ie: the duty to avoid harm) when driving a rental car.

When you rent a car, check out your state’s DMV website to see what type of coverage is required by law. If you are in an accident, you are liable for the cost of any damage done, including medical bills and lost wages. You need to purchase an insurance policy before driving the vehicle you rented out onto the street. 

The rental car company is required to provide cover for a vehicle that meets the basic requirements of the state’s laws. Your duty is to inspect the vehicle before you take it out on the road because you are responsible for ensuring that it meets your safety expectations.

This is not a permanent insurance policy. Your coverage extends to any damage done to other people and their property while you are driving a rental. When you return the vehicle, you are no longer covered by the rental company’s insurance. 

Borrowed Vehicle Insurance

Suppose you borrow someone else’s vehicle to conduct business activities. In that case, your level and type of responsibility depend on who owns the vehicle and what type of insurance they have in place. It can lead to trouble if something happens while driving someone else’s car and their insurance policy limits who is covered. 

Some states require the driver to have a liability insurance policy in place at all times when driving someone else’s vehicle, regardless of whether the vehicle itself carries insurance.

If you live in a state that requires this, then it’s essential to read the laws to know how much protection your policy offers.

In any case, separate insurance is a wise choice in every state while driving someone else’s vehicle. 

Borrowed vehicle insurance is also called “loss damage waiver.” It basically means that if someone gets hurt or damaged in an accident caused by a borrowed vehicle, the owner will not have to pay for any medical expenses and damages incurred. If the owner does not have insurance on the vehicle, you are required to pay for any damages.

Non-owned Vehicle Insurance

Non-owned vehicle insurance covers damage to any vehicles being used in the course of business activity that does not belong to you, are not leased and are not rented. For example, suppose a sales representative is driving between customer sites in his or her private vehicle. In that case, this makes it a borrowed vehicle, and then their private insurance is not valid. In the event of an accident, your business could be deemed liable for the resulting costs

Hired and borrowed cars are often not covered by the owners’ own auto insurance policies. If you’re driving a leased car or borrowing someone else’s car, make sure you have auto insurance before driving off. 

The cost of this insurance varies depending on the type and coverage that you need. It also depends on the age and make of the car that you are borrowing. 

Suppose your business already has vehicles covered by a general insurance policy. In that case, you probably don’t need extra insurance, and most rental companies automatically require the bare minimum of cover as stipulated in your state.

Remember that personal auto insurance policies probably do not cover damage or injury unless you already have commercial coverage. It’s generally a better idea to carry more protection.

There are four main car insurance options that you could be offered through your insurance agency or broker:

  • Car liability insurance – covers other owners’ property damage and injuries if you cause an accident.
  • Car loss-damage waiver (CLW) insurance waives your responsibility to pay for any claim, including total loss, accident damage, theft or vandalism. 
  • Collision damage waiver (CDW) is similar to CLW, but it excludes theft. 
    • For both CDW and CLW cover, the policy covers the lease or rental car company’s fees as long as the vehicle is out of commission. 
    • Most full coverage insurance policies give the same cover, but some will not, so it’s a good idea to check your own policy before you rent or hire a vehicle.
  • Personal accident auto insurance pays for medical bills for the driver and any passengers, regardless of who was at fault in the accident. It’s similar to the standard MedPay and PIP terms of your standard vehicle insurance cover.
  • Rental auto personal effects coverage protects the content of the vehicle such as electronics, display material, and inventory, if they are stolen from a car.

What are the ranges of rental, hired and non-owned insurance costs? 

Many small insurance companies offer online portals where you can request a quote. We suggest not automatically selecting the cheapest offer. Make sure to compare the terms and conditions to see that your exact situation is being covered.

A helpful guide if you want to compare auto insurance quotes for a rental car, is to get a quote from any of the many online insurance websites. Below are a few average prices for coverage per day from popular rental insurance companies. These do vary widely, based on the specific features of the contract.

Most important are the category of the vehicle, the range of cover given, the accepted deductible, the age of the driver and other features. 

Most policies set a deductible amount that you must pay per incident, typically around $500-$1,000. The policy kicks in only if your claim exceeds this amount.

Cover Cost range per day
Loss Damage Waiver $12 – $30
Liability Coverage $15 – $20
Personal Accident Insurance $7 – $13
Personal Effects Coverage $30 – $60

FAQ

Do you have to buy non-owned vehicle insurance?

In the US, the answer to this question varies depending on your location and the ownership of the vehicle. Some states require that drivers purchase non-owned vehicle insurance before they can drive on public roads.

Even though non-owned vehicle insurance is not mandatory in most states, it can be a convenient way to protect yourself in case of an accident. It’s also worth considering if you’re renting or borrowing a car for an extended period of time. 

What is covered by this insurance?

  • Third-party claims for vehicle damage, including the cost of repair, and any parts used in the repair or replacement process. 
  • Injury to third parties, including medical treatment, hospitalization, rehabilitation, loss of earnings. It’s important to note that the driver’s injuries are NOT covered by this insurance.
  • The cost of replacing personal property that was in the vehicle, including items such as samples, stock and electronics.
  • The cost of transport to your destination in another vehicle, up to the limits established by your coverage.

Do you need to buy non-owned, hired and borrowed vehicle insurance?

It is important to consider buying insurance for any vehicles you use in commerce that you do not already own. This type of insurance may not be required by law. Still, purchasing it is a good idea because it will protect you in case of any accident from damages, theft and legal costs. 

Car collision damage waiver is an insurance policy that provides coverage for the rented or borrowed vehicle in case of an accident. It covers up to $25,000 of damages per accident and is legally required in many states.

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