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Rental cars on ferries in Croatia

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I'm planning to rent a car in Croatia through Auto Europe and there was a note on the web-site indicating that you need permission to take the car on a ferry. We do plan to take the car to Hvar, so we sent an email about it. Auto Europe responded that they'll check with the car company (Auto Europe is kind of a broker, not the actual rental company), but even if the car rental company says ok, the insurance will not be in effect during that time. We'd be responsible for the entire cost of the car if anything happens.

Is this typical? I would presume many tourists with rental cars take them to the islands. Anyone have personal experience with this? Any recommendations on what we should do?

Thanks,
Karen

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