U.S. Equipment Rental Continues To Grow to $51 Billion in 2018. Prepare for Increase With Insurance Coverage for Construction Equipment
In a blog post a little while back, we talked about growth in the equipment rental market. Now the American Rental Association (ARA) is projecting even greater growth, suggesting total U.S. equipment rental revenue will be more than $51.2 billion by 2018.
More specifically, they’re predicting:
- A 7.6% increase this year, to $35.8 billion.
- Another 10.5% increase in 2015, to $39.6 billion.
- 10.2% growth in 2016, to $43.6 billion.
- An 8.9% increase in 2017.
- 7.7% growth in 2018.
That means the equipment rental industry will hit an all-time revenue high in 2016. The previous record, achieved in 2007, was $36.9 billion.
Big push to build inventories.
To meet this burgeoning demand, the ARA says over the next five years rental companies will invest more than 30% of their revenues in new equipment.
It’s a great time to be in the construction equipment rental business, and your dealership could very well be planning to expand your own rental fleet. But will you be properly prepared with a corresponding increase in insurance coverage for construction equipment?
More rentals can significantly increase your revenue, but protecting your assets – and protecting your dealership from potential liability issues — is critical to financial success as well as your peace of mind.
Lack of coverage leaves you dangerously exposed.
Once you rent a machine, it’s in your customer’s hands until it returns. Things can go wrong. With proper business insurance and well-thought-out rental policies, you can be confident you’re not unnecessarily exposing your dealership to problems.
General business insurance should include standard coverage such as liability, property, inland marine and auto coverage but also conversion and business income coverage. Conversion covers you in the event of customer theft. Business income protection covers actual losses of net profit and continuing expenses (including loss of rental income) if your business is suspended due to physical property damage at an insured location.
Loss/damage waivers alone aren’t enough.
You can earn additional revenue by offering loss/damage waivers to rental customers. As the name implies, that protects them in case the equipment is lost, damaged or stolen. However, it doesn’t fully insure the machine, so your customer is still responsible for heeding OEM and your requirements. Some customers may not want to spend more to purchase a loss/damage waiver.
On the other hand, it’s risky to assume the protection implied by your customer’s certificate of insurance is adequate, because it may not be. Industry watchers say rental certificates can become inaccurate over a long rental period, and can even expire while your customer is still in possession of your equipment.
It’s your investment, so it’s up to you to protect your iron.
A good rental contract can help protect you, especially from liability claims or other legal issues. The contract should be executed between your dealership and your customer and should clearly state your rental policies.
It’s up to you to ensure your customer is fully compliant with all the terms outlined in your rental contract, including those relating to insurance. That section should specify the types of insurance coverage for construction equipment and amounts you require customers to carry.
You should also require either a damage waiver or physical damage insurance. Ultimately, the rental agreement should hold your customer responsible for any loss or damage to your equipment other than normal wear and tear – the machine should be returned in the same condition it left your yard.
At ADI Agency, we understand from first-hand experience how your dealership operates and why proper insurance is so critical to sustain your business. Since we also have extensive experience as insurance professionals, we are the only company that offers construction equipment insurance products, consulting and brokerage services specifically crafted for dealerships like yours.
Our Protect My Iron® products enable you to protect your rental fleet and also significantly improve customer service by directly offering your customers insurance coverage for construction equipment, warranty programs and easy-to-use software that ties it all together. At the same time, your dealership can earn revenue via sale of these products. Everybody benefits.