Automobile Liability –Rented and Borrowed Vehicles, Adult Children

Rental Cars
1. When renting a car, the liability of the renter to third parties is generally covered by the renter’s own automobile liability policy for rental periods of less than 30 days. Any excess liability (umbrella) policy held by the renter should also provide excess limits following the underlying auto policy.
Note that any Uninsured / Underinsured (UM /UIM) coverage included in the renter’s own policy should also apply for the duration of the rental period.
However, physical damage to a rental car may not be covered even if physical damage coverage is maintained on the renter’s primary automobile insurance policy. If the loss occurs when the rental car is a temporary substitute, such as when the car is rented to replace a vehicle that is being repaired due to a covered loss, there is usually coverage. However, if the car is rented for an extended period such as a vacation, it is not considered a temporary substitute and most carriers will not provide coverage. Exceptions to this include Chubb and Fireman’s Fund.
2. Most rental car contracts stipulate that the company has the right to charge the renter of the vehicle for both its ‘loss of use’ and depreciation of the vehicle following an accident. Chubb and Fireman’s Fund policies comwill usually cover these charges, but other insurers may not.
3. Credit card benefits often include physical damage coverage on rental cars. The extent of coverage varies so it is important to know the limitations. For example, some cards provide coverage for collision but not theft, and others limit the number of allowable days of rental car coverage.
Although the renter’s own auto policy or credit card may provide varying degrees of coverage when renting a car, the renter must be comfortable that this coverage is sufficient before declining the rental car company’s insurance. Even if a claim is paid by the renter’s insurance, there is always the chance that a significant payout could affect the renter’s own policy renewal. Occasional renters might consider the relative peace of mind from simply buying the offered coverage from the rental car company.
 
Adding Adult Children to the Parents’ Auto Policy
Adding adult children to the parents’ auto policy is a common practice. While it can make sense as long as they live at home, things are more complicated when they move away permanently. An adult child who has left the household is no longer defined as a ‘Family Member’ and therefore typically has liability coverage under the parents’ auto policy ONLY when driving a ‘covered auto’ i.e. the parents’ vehicle. (Children away at school are still considered to be ‘Family Members’). Therefore, a non-resident adult child who is driving a rental car should purchase insurance from the rental car company.
 
If the non-resident adult child is driving a friend’s car, coverage is not extended from the parents’ auto policy (which lists the child as a driver) and the adult child will have to rely on the friend’s auto insurance, which may not exist or have inadequate liability limits. In this situation either a “named non-owner” automobile policy or a Chubb tenants policy should be purchased. The “named non-owner” policy provides liability coverage when the policyholder does not own any vehicles. The Chubb tenants policy is broad and,when written with liability limits of at least $1 million, typically covers the policyholder when driving non-owned vehicles. This applies only if the policyholder does not own a vehicle.

Adult Children Permanently Away From Home, with a Parents’ Vehicle
Sometimes the adult child may keep the parents’ vehicle after moving away. In this situation, even though insurance usually follows the vehicle, the parent remains the titleholder and is still deemed the primary driver. To correct this, the car should now be insured in the name of the non-resident child; the parents should be listed as drivers on the policy in case they are sued as the titleholders of the vehicle. In addition, as long as the parents are listed as drivers, they should schedule the vehicle on their excess liability policy.

Chartwell Bulletins are produced by Chartwell Insurance Services, Inc. an independent insurance broker specializing in the personal asset protection of high net worth individuals. Chartwell Bulletins address issues of general interest and since coverages vary by company and by state, should not be taken as an interpretation of a particular policy or advice on any individual situation. Chartwell Insurance Services, Inc. is not affiliated with any of the companies mentioned n this Bulletin and does not accept compensation from any of these entities.

A representative of Chartwell Insurance Services, Inc. will be pleased to discuss all aspects of your personal insurance.  Contact: Rebecca Korach Woan | 312. 645.1200 | rwoan@chartwellins.comprice