Why is it not always a good solution to insure my rental equipment with my business insurance provider?
Most insurance companies are not comfortable with covering equipment on rent. They don’t feel that the customer renting the equipment will protect is as if it were his own, and he may not have the necessary training to operate the equipment properly. For this reason higher rates are charged to the dealer’s business insurance policy.
In the event of a claim, it will go against the dealer’s entire business policy for rating purposes. The dealer’s loss history will be a determining factor in his premium at renewal. Every claim will affect the dealer’s premiums. Too many claims may cause his insurance to be canceled. Keeping the dealership’s rental exposure separate from its business policy may be a better solution.
What are the advantages of using REP?
There are 12 realistic and undisputed reasons for using rental equipment protection. Nine of them are listed below. Three distinct advantages are not listed because they are different with each insurance company.
1. Increase the rental department’s profit with absolutely no risk.
2. Reduce the dealership’s business insurance premiums.
3. Reduce the risk of losses affecting the dealer’s business policy premiums.
4. There is no need to obtain an insurance license to sell loss damage waivers, and they prevent costly and disruptive legal issues.
5. REPs are not limited to fire, theft and vandalism.
6. Reduce the dealer’s payroll.
7. Keep ahead of the competition.
8. There is no need for the dealer to get involved with claim settlements.
9. Enjoy great customer relations.
What is the cost of REP?
Rates vary based on volume, type of equipment, location and loss history.
Each carrier is different depending on coverage offered. Typical rates run from 4 to 10 percent.
What should we charge for REP?
This is difficult to say. It depends on your area of the country, but as a general rule between 10 and 15 percent. Some dealers charge only what the insurance company charges them. It is entirely the dealer’s decision. There is no set rate for what the dealer can charge.
What qualifies my dealership to participate in REP?
Each insurance company has a set of criteria, but in general the dealer should be marketing at least $250,000 in REP sales.
What complements REP?
No rental is complete without a Certificate of Insurance, and managing your own can be time-consuming and costly. A good tracking program will ensure the dealer that the customer’s insurance is adequate for the dealer’s needs. Items being verified are limits of liability, the dealer being listed as an additional insured, the equipment on rent is listed on the certificate, and the customer’s coverage is at least the value of the equipment being rented. Some other areas that may need to be added to the certificate are auto liability and W/C.
If you have questions regarding REP or any insurance issue, from claims to coverage, from industrial to material handling, contact the Insurance Whisperer at CED publications. We will answer in the next issue. If it is urgent you can contact us directly through CED’s Editor-in-Chief, Sara Smith.