Increase Rental Revenue With Add-on Sales

Good news, equipment rental companies.

The American Rental Association (ARA) ( has released its second quarter outlook, which predicts continued category revenue growth of 5.6 percent in 2016 and 4.9 percent in 2017 in the U.S. The domestic rental segment is expected to top $50 billion within three years. It’s a good business to be in, and it’s growing faster than the U.S. economy right now

It doesn’t stop there. From

The Dodge Momentum Index rose 0.6% in April to 116.5 from its revised March reading of 115.8 (2000=100). The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. April’s gain was due to increased planning activity for both commercial and institutional building, with commercial planning moving 0.8% higher and institutional planning rising 0.4%.

The market is favorable, and basic economics tells us this means we should look for more players to enter the rental business to help meet the increasing demand. Competitors are looking for an edge, changes that boost profitability, all while delivering a good value for rental customers.

For years, rental companies have accepted certificates of insurance from renters. In the event of a loss, the claim is filed against the customer’s insurance and hopefully there’s enough insurance to cover the damage to the equipment. Any loss that isn’t covered by the certificate of insurance is typically filed against the dealer’s business insurance policy, which increases the likelihood that premiums will also rise. It may often be an adequate system for managing risk, but it isn’t a profit enhancer.

Many dealers will use a damage waiver to ensure equipment is covered and to protect their business insurance policy, while at the same time driving rental revenue through add-on sales. At the point of sale, the rental associate sells a damage waiver to the equipment renter, the cost of which is usually based on a percent of sales. The best damage waiver that a dealer can offer is financially underwritten by an insurance carrier. On a regular schedule, usually monthly, the rental company sends a report to the insurance company that shows how much rental revenue was attached to a damage waiver in the previous month. This report is used to calculate how much the dealer owes the underwriter for the coverage.  A portion of the fee collected from the renter goes to the underwriter to pay for the coverage, the balance stays with the dealer to improve their bottom line.

The benefit to this system is that the equipment is covered and the damage waiver is a profit enhancer, but not all damage waivers are created equal. There are two main types of coverage, named perils and all risk. Named perils is just as it sounds – it covers what the damage waiver says it covers and nothing more. All risk covers everything with a limited number of exclusions, such as wear and tear. The renter is completely covered with all risk coverage* or is covered as per the named perils on the damage waiver, without waiting for an insurance company, and with no risk of increasing business property and casualty insurance premiums. Claims are handled quickly and efficiently.

The added revenue from damage waiver sales can give rental companies an edge over the competition by making the rental business more profitable and providing value-added products to equipment renters.

Contact us today for a free, no obligation quote. We can discuss how Rental Equipment Protection, all risk coverage from J.T. Bates Insurance Group can help making your rental business more profitable while keeping your customers happy.

Is your business set up to handle the increasing demand? How are you ensuring that your equipment – the lifeblood of your rental business – is protected while it is out on rent?


*Not all rental insurance companies provide all risk coverage. Most offer named perils only, which may not cover collision, accidental damage or overturns. Check your policy, and then give us a call to find out how we can help you with all risk coverage at competitive rates.