Be Smart About Your Construction Equipment Rental Business | Loss Damage Waivers (LDWs) & How They Work For You & Your Customers
Heavy competition is a fact of life in the construction industry. With economic recovery finally underway, the construction equipment rental business is expected to surge as contractors look for cost-efficient ways to capture more work. Is your dealership’s rental department positioned to take advantage of this increase in business most profitably?
Loss damage waivers can help you do that.
Offering loss damage waivers, of LDWs, can help you stand out from the competition and also generate additional income for your dealership.
Under normal circumstances, it’s up to your customer to provide insurance protection for the equipment they rent. But when they show up at your rental counter they don’t always have the right documents, or the right coverage. That holds up your rental line, delaying all your customers’ ability to get what they need and get back to work. That’s frustrating for everyone, including your rental staff who have to waste additional time tracking down proper paperwork.
Loss damage waivers eliminate all that. With an LDW, you’re waiving your requirement that the customer provide their own insurance. Instead, you’re allowing them to “piggy-back” on your insurance to cover the machine during the rental period. For that obvious benefit, you can charge rental customers a fee. They are not purchasing insurance, they are paying for the privilege of using your insurance.
You can charge any amount; the usual fee is about 15-20% of the rental amount.
Everybody benefits when you use LDWs.
Customers don’t have to waste time contacting their insurance agent to get a certificate to bring you. Time is critical for construction firms, especially if it’s an unplanned rental – to augment an existing fleet to complete a job faster, or to replace a machine that’s down for maintenance or repairs.
It’s more convenient for you, too. Your construction equipment rental business flows more smoothly, with less paperwork, so your employees can be more productive. You earn money from each LDW, and your equipment is fully protected at all times.
It’s easy to offer LDWs.
First, you’ll need to review your inland marine policy to be sure it’s correctly worded to allow you to offer loss damage waivers. This is a crucial legality that differentiates between LDWs and the sale of short-term physical damage policies, which requires an insurance license. It’s important that you work with an inland marine expert on this to ensure your policy is properly worded. Also double-check to be sure the insurance carrier underwriting your policy is A-rated.
Because your insurance is covering the equipment against damage or total loss, your customer’s insurance is never at risk. Likewise, because it’s the LDW that covers the machine being rented, your overall business insurance is never at risk, either. If something goes wrong, the LDW pays the claim.
On the other hand, under the traditional system where rental equipment is covered by your customer’s insurance, you could still be at risk. You’ll be responsible in the event of a claim, if your customer’s coverage is inadequate. You could both see increased premiums as a result.
LDWs eliminate this potentially costly exposure, protecting your business insurance policy with no losses.
Offering loss damage waivers is a value-added service that adds certain value for your customers. Nothing builds loyalty like making the rental process simple and fast.