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Reduce Business Insurance Premiums [Eliminating Contingent Physical Damage Coverage]

By Amanda Murphy | Posted on September 3, 2020

REP™ (Rental Equipment Protection)| JT Bates Group Products

It’s 2020, and competition is tough. Do you know what’s in your insurance policy? Dealers that manage their rental fleets well and find new ways to reduce expenses will weather an economic downturn more effectively than other dealerships. This blog explores one way dealers can reduce business insurance premiums by eliminating contingent physical damage coverage.

Still think process may not be a huge factor in a successful rental program? 100% of equipment dealers with rent-to-rent revenue of $2.5 million+ per year maintain a detailed documented process flow of rental operations. That includes business insurance coverage.

Associated Equipment Distributors 2020 Annual Rental Report: Companion to the Cost of Doing Business Report

Quick Lesson: Contingent Physical Damage

Contingent physical damage is coverage provided by a business insurance policy for damages that are not covered by a customer’s certificate of insurance or by a damage waiver. It also includes damages that exceed the coverage limits from certificates of insurance or damage waivers.

When is contingent physical damage insurance used?

Insurance claims on contingent physical damage may be filed if a dealer forgets to collect a certificate of insurance from a rental customer, or if the certificate did not contain adequate coverage to pay the claim. For example, if the certificate of insurance has a limit of $50,000, and the repairs to the machine are $80,000, a claim may be filed against contingent physical damage to cover the difference. Another example includes damage waivers with limited coverage. If the damage waiver sold by the dealership has limited coverage that doesn’t include collisions, then when a collision occurs (a loss common in the equipment industry), the damage waiver does not cover the loss, and the claim is filed against the dealer’s insurance policy under contingent physical damage.

[Related: Not All Loss Damage Waivers are Created Equal]

But how much does contingent physical damage cost, really?

Typically, CPD is hidden fee in an equipment dealer’s business insurance policy, so it might be difficult to say because it doesn’t carry its own line item in the policy charges. It can be removed to reduce business insurance premiums, but it’s imperative that coverage exists that protects the dealer from loss before the coverage is removed. For one JT Bates Group client, the savings was $7,000 annually.

For one JT Bates Group client, the
savings was $7,000 annually.

Before you make any changes to your business insurance policy, make sure you have protection for your equipment. For current REP customers, the answer is simple: coverage with REP is so extensive that it allows for a dramatic reduction—possibly elimination—of contingent physical damage coverage. For dealers who do not offer REP to their rental customers, or who may have unique insurance situations, it’s possible to find ways to save on business insurance premiums, but it does require a comprehensive review of your policy.

How do I know if I’m paying too much?

This is a difficult question, and one that requires a good amount of digging. Insurance policies are not a one-size-fits all solution. They’re often complex agreements with hidden fees and sometimes redundant coverage. In fact, many dealers do not take the time to review insurance policies when they are due for renewal because the process can be so intimidating and time-consuming. Additionally, Insurance agents are not incentivized to reduce premiums. In fact, the opposite is true–agents make more money when premiums are higher. So how do you keep from over-paying for insurance? Unless you’re an insurance specialist, reviewing the details of coverage and shopping the best price around can be overwhelming.

Having an insurance specialist who works on your behalf simplifies the process. Unbiased insurance consultants can review your policies, make recommendations for where to reduce or eliminate unnecessary coverage, and shop the best rates without being limited by specific carriers. Insurance consultants work for their clients, not for the insurance company, so they are incentivized to save money for their clients.

If you’re interested in exploring how you can save your dealership thousands of dollars annually, contact us today.

[Related: Ricker+Associates Insurance Consulting from JT Bates Group will review your insurance policy to find out where you can save even more. Click here to learn more.]


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