According to the American Rental Association (ARA), construction and industrial rental revenue is forecast to improve 8.5 percent this year to $26 billion. As equipment dealers look for ways to add value in this competitive market, more companies are turning to physical damage coverage to ensure that the equipment—the lifeblood of the company—is protected.

Participating in a rental equipment protection or loss damage waiver program through a licensed insurance carrier is the best way to protect rental equipment. Many equipment dealers are choosing this option because it increases rental revenue, limits exposure to risk and provides a great value to rental customers. Insuring equipment with a licensed carrier can simplify rentals and ensures compliance with necessary legal exposure.

With rental equipment protection, the policy typically is rated as a percentage of rental sales. When equipment is rented out, the equipment dealer may offer physical damage coverage to the renter as part of the leasing contract for a specified time period. In contrast, a business insurance carrier may charge a premium for an entire year. The income from the sale of the physical damage coverage is used to pay the contracted insurance rate to the insurance company, and the difference goes straight to the equipment dealer’s bottom line. This may be recognized as profit or used to offset any loss of rents incurred while equipment is being repaired.

Following are a few things to consider when choosing a program.

  • All Risk vs. Named Peril. When shopping the market for rental equipment protection, it’s best to choose a program that offers all-risk coverage. The difference is significant. All-risk will cover all losses (unless specifically listed as an exclusion), whereas named peril will only cover what is specifically listed. In many cases, that will be limited to the most unlikely losses, such as fire, theft and vandalism.
  • Replacement Cost vs. Actual Cash Value. Most carriers will only cover actual cash value for equipment that is a total loss and needs to be replaced. This can be detrimental in the case of newer equipment, which loses a significant amount of value after its first use. A few carriers will offer replacement cost on that newer equipment.
  • Additional Services Offered. Some carriers offer additional services such as certificate tracking, which helps to verify the customer has proper liability coverage as well. 

For dealers, a rental equipment protection program eliminates the risk of damage, enhances profitability and doesn’t affect the corporate insurance policy in the event of a loss. Because the claim goes directly to the physical damage insurance company, the corporate insurer never hears of the loss, and the claims are processed quickly. The customer benefits from not waiting for coverage from an insurance company, as well as hassle-free claims in the event of a loss; plus, claims don’t affect property and casualty premiums. Essentially, the customer remains happy.

Jayme Bates is vice president of J.T. Bates Insurance Group, Hilliard, Ohio. For more information, call (877) 900-8729 or visit