North Carolina Auto Insurance Companies have some protection available for people who rent cars when they travel but even the broadest protections offered don’t protect you against all the losses you are signing up for when you sign your name on the rental contract.  Here are three big risk scenarios that you need to be aware of before you sign the rental agreement.

While your NC auto insurance policy will provide you with protection against losses to rental vehicles as long as you have collision and comprehensive coverage on at least one care on your policy, the truth is that this is not the entire picture.  The differences in the rental car contracts from the different rental companies may leave you responsible for some losses that your insurance policy doesn’t cover.  And in at least 2 of the 3 risk areas, you probably will not be able to find any coverage for this exposure at all.  So, what are these gaps in insurance protection?

The first gap area deals with loss of use losses.  If you wreck a rental and the rental car company chooses to repair the vehicle, then your contract with them will generally hold you responsible for the loss of rental income on that car until it is fully operational again.  This can run into quite a bit of money but the good news is that most NC auto insurance policies have an endorsement that you can add to your policy for a couple dollars a year to provide you with this coverage.  You can read more about loss of use coverage for rental cars by clicking here.

The second gap area comes into play if your contract with the car rental agency says that they can choose to replace the car, rather than repair it and you are responsible for all of these costs.  The problem here is that your North Carolina auto insurance policy will only pay for the cost to repair the vehicle.  If the car was worth $20,000 when you rented it, and after you damaged it, it is worth $8000 and the cost to repair it is $4000, then you will be out another $8,000 after the rental company replaces it and deducts the salvage value of $8000.  This is because your car insurance policy will only pay the $4000 to repair the vehicle.  As of this time, I know of no insurance company that has protection for this gap in coverage.

The third gap area is called the diminished value gap.  This happens when the rental contract specifies that after you cause damage to the car, then you are responsible for the perceived diminished value of the vehicle after it has been repaired.  Let’s take the previous example.  The car was worth $20,000 and you caused an accident with it that will cost $4000 to repair.  Now after the repairs are completed, the car rental company declares the diminished value of the vehicle to be $17,000 because it is now a previously wrecked car.  Your NC auto insurance policy will pay the $4,000 to repair the vehicle but the additional $3,000 for diminished value will be your responsibility.  In some states, you can purchase coverage for diminished value losses but in North Carolina at this time I am unaware of an insurance company offering this protection.

Taking a trip with the family and renting a car is supposed to be a fun and exciting time.  I do want you to enjoy your trips but it is important that you be aware of the limitations of your auto insurance policy for protecting you.  At Clinard Insurance Group in Winston Salem, NC, we want all of our policyholders to be informed consumers.  If you have any questions about car rental coverage, or if you need any help with your auto insurance or your home insurance, please call us, toll free at 877-687-7557 or visit us online at www.ClinardInsurance.com. 

In many retail businesses there is a peak season where inventory runs higher than the rest of the year.  For most retail establishments, this ocurs the months leading up to the Christmas holiday shopping season.  And most insurance policies for retail businesses have a way to account for this fluctuation in inventory.  The dealer’s garage policy does not, but there is a way that used car dealers can protect themselves from this hidden monster without paying an arm and a leg to do it.

The first step is to analyze your dealership to understand if you have a peak season.  I have found that most used car dealerships do have a peak season and this season generally runs from February to May.  This is the time when income tax refunds are arriving in mailboxes and people go out and buy cars with the new found money.  Next, take a close look at how you plan for and deal with this higher sales season.  Do you purchase more cars and build up your inventory?  If so, when do you start?  When does your inventory get back to lower levels?

There are 3 ways to deal with this inventory fluctuation from an insurance standpoint.

The first way is to simply ignore it.  This may seem like the least expensive approach at first unless you have a large loss to your lot, such as fire or hailstorm and you discover that you are underinsured without enough insurance to cover all of your damaged inventory.

The second way to handle this inventory fluctuation is to increase the limit on your dealers open lot coverage to the amount that represents your highest inventory level at any time during the year.  This is certainly better than ignoring the issue altogether, but why pay for $100,000 of dealers open lot coverage if for most of the year you only need $50,000?

The third way is one that I see very few dealers take advantage of, yet it is the easiest and least expensive approach.  Just call your agent when your inventory increases in February or January and raise the limit on your dealer’s open lot coverage.  Then, when your inventory has dropped down in late May, give another call to your agent and have them drop your limits back down.  It’s easy, simple and it affords you the coverage you need without over paying for insurance the rest of the year.  Why more dealers don’t pay attention must only be because they don’t know that this is an option available to them.

At Clinard Insurance Group in Winston Salem, NC, we specialize in helping used car dealers all across North Carolina, Virginia, South Carolina, Tennessee and Georgia with their garage insurance policies.  If we can be of help to you with advice or answers to your questions, or if you just want to find out how to get the best policy for the least amount of cash, please call us, toll free, at 877-687-7557 or visit us on the web at www.TheAutoDealersHelper.com.