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Sell Equipment Coverage.

It has been called damage waiver, rental equipment coverage, rental protection, fire theft and vandalism coverage, and many other clever descriptors. To be clear we never call it "insurance". That would just get us simple rental folk in a lot of trouble.

One fact is, no matter what you call it, it can help your organization recover lost costs and generate extra revenue.

The concept is simple, offer optional coverage at an additional cost (usually a percentage of the rental between 7 and 14%). Coverage is described in your contract language and can be as generous or constricting as you wish. My advice is to be lenient but with restrictions. Offer coverage for the basics of accidental damage, theft, fire and vandalism. Restrict coverage for intentional misuse or abuse (gas in a diesel engine). Also remember to only cover theft and fire if a formal report is filed with local authorities. You should also include a deductible to limit costs of large claims. A suggestion would be 10% of repair or replacement to a maximum dollar amount (industry ranges from $1000-$5000).

Example: ABC Construction rents a tamper for $100. Coverage costs them $10 (at 10%). The unit is stolen from site and a police report is filed by customer. Retail replacement cost is $2000. The customer would pay 10% ($200) deductible.

You may look at the example above and say "How does that make my rental house more profitable? I'm losing $1800!". It may look that way at first, but in reality, you have earned $100 for rent, $10 for coverage, $200 in deductible for a total of $310. Your depreciated value of a 2 year old piece is probably around $1000. So your one time loss is $690.

Looking at the BIG picture, your additional revenue will more than cover any of these losses. To keep it simple, if your rental house does $1 million in pure rental, and if you sell coverage on only half your transactions, you will generate $50,000 in extra revenue (based on 10% coverage cost). That more than covers the $690 loss on the single transaction.

You will also find that you get very few claims. From my personal history, the numbers were around .15% or $1500 for every $1M in revenue.

When you do have to honour a claim, make sure to market it. Your customer will let others know. You should as well.

I'd like to give a personal example of a customer who had a skidsteer stolen from his site. He was extremely upset with his "assumed" cost of $40,000. When informed that he only owed $2500 (deductible), he was ecstatic! He also told three other customers about the coverage in the same week.

Many of the tips I plan on sharing will apply more to smaller rental houses, but this one applies to all. The larger players all understand this concept and offer it at their branches. Where they can improve is by "selling" it. Start friendly competitions between branches and sales reps, sell the value to account customers, and market "big wins" for customers.

Thank you for your time and attention, I hope you watch for new tips I'll be posting on a regular basis.

Together, let's make our industry better.


JimBo