Hired Physical Damage
May 7, 2015
Author | Sarah Riniker, Account Administrator
If your company hires, rents, leases or borrows vehicles and is responsible for any damage to the vehicle, hired physical damage coverage would apply.
If hired physical damage coverage is purchased, it would respond to hired autos on a primary basis. This occurs the same way the coverage would respond to owned vehicles. Hired autos are defined as autos that are hired, rented, leased, or borrowed, but not from an employee, partner, or member of your own household.
It is becoming more common that leasing companies are looking for hired physical damage coverage from its lessees. While they may not request hired physical damage by its name, it is required in the wording they request on their certificates. An example of which is as follows: “Leasing Company” is loss payee for all vehicles leased, rented or supplied as a substitute to the named insured. This means that physical damage coverage is provided for any vehicle given to the insured under the terms of the original lease. An example of why this is so important from the leasing company’s point of view is they want to ensure that should the original unit rented break down at 2:00 a.m., there is automatic coverage for the substitute unit the leasing company provides. This eliminates any need to wake up your agent in the middle of the night looking for a certificate of insurance. More importantly, it keeps your load and drivers on the go.
One additional item to note when entering into a lease on a unit where you are required to carry the physical damage coverage: pay special attention to the amount that you are responsible for. Some leases require the lessee to be responsible for a specific amount way above the actual value of the leased/rented unit. The insurance company is only going to pay what the unit is worth or the limit on the policy. In the end the lessee could be forking money out of their pocket to cover the difference.
For businesses that utilize leased and rented autos, hired physical damage is definitely a great option that could minimize hassle when entering into agreements with leasing companies.
- Reference Connect