Why LDWs Increase Rental Income for Construction Equipment Dealers
The construction equipment marketplace is extremely competitive, especially with the recent downturn in the economy. Every dealer is trying their hardest to get the rental which is making it very difficult to generate a profit. The dealers are almost giving away rentals in order to steal the deal away from their competitor.
So how can an equipment dealer remain profitable in this type of marketplace?
Construction equipment dealers need to start looking into other avenues to generate income to make up for their skinny deals. Simply renting equipment without any additional programs is not enough to keep a dealer afloat. The simple solution is to offer rental insurance, or Loss Damage Waivers (LDWs) to your customers.
LDW provides an easy way to help protect against costly bills for major repairs or replacement of rented equipment.
LDW is not insurance. It is an agreement between you and the rental dealership that limits your financial responsibility for loss or damage to rented equipment, in exchange for a fee, subject to the terms and conditions of the rental agreement and any applicable state law.
How do LDWs benefit the dealer?
The construction equipment dealer is able to create a new revenue stream by offering this program. They charge a “fee” to the customer in order for the customer to protect themselves against any repairs and damages they may do to the machine. Typically dealers charge anywhere between 15-20% of the rental to the customer. Dealers are allowed to charge this because again it is not considered insurance is it allowing their customer access to the dealer’s insurance.
LDWs also make it extremely easy for dealers to rent equipment. Typically before a customer can rent a piece of equipment they need to show proof of insurance where the dealer collects a rental certificate from their customer. In this process, the customer has to call their insurance agent to get the certificate and provide a copy to the dealer. This process is lengthy for the customer and the dealer. It takes time away from the rental agent to process paperwork that could be eliminated, and allow him to do his job – rent equipment. It also adds another cumbersome step for the customer who wants to rent his equipment and get back to the job.
This process would be completely eliminated for the customer and the construction equipment dealer by offering LDWs. And at the same time creating another revenue stream for the dealer and allowing the customer to get back to the job as soon as possible.
What Construction Dealers should look for in their LDW programs?
Construction dealers want to make sure that when they purchase their Inland Marine policy that the language in their policy is worded correctly. This is extremely important because the way the policy is worded will be why it is legal for a dealer to sell LDWs versus short term physical damage policies. Remember LDWs are selling access to your Inland Marine policy so you do not need an insurance license because it is not an insurance policy. Some companies in the marketplace are selling LDWs but in reality it is short term physical damage insurance and you would need to be licensed.
Before you start to sell LDWs make sure you ask an expert to read your Inland policy to see if it is worded properly. You also want to make sure the Insurance carrier writing your Inland policy is a reputable carrier. Look for carriers that are A rated.
Summary of benefits for LDWs
Aside from offering you a quick and easy boost to your profits, offering access to your dealer inventory coverage has added benefits for your customers:
- Eliminates the need for your customers to find and sign up for their own insurance policies – a time consuming, costly and tedious process in most cases
- Offering access to your coverage in this way also allows you to retain ties with your customers, which can be very beneficial, in terms of an ongoing relationship with that customer
- Eliminates lost opportunity costs associated with your customers waiting for a proper certificate to take possession of your equipment and get to work