Last Updated: May 31, 2024, 7:06 am by TRUiC Team

Tool Rental Business Insurance

Every tool rental business needs insurance. Knowing which type of insurance you need and the best place to get it is the next step.

This article will cover the main types of business insurance and help you find the best tool rental business insurance.

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Recommended: Next Insurance is dedicated to matching small businesses with the right policy at the best price.

Best Insurance for a Tool Rental Business

The most common and comprehensive type of tool rental business insurance is general liability insurance. We recommend general liability insurance as your first line of defense against a variety of the most general and commonly occurring claims.

Some of the risks general liability insurance covers are:

  • Bodily injury
  • Property damage
  • Medical payments
  • Legal defense and judgment
  • Personal and advertising injury

While a tool rental business isn’t legally required to carry general liability insurance, operating without it is extremely risky. If your tool rental business is sued, you could face fees totaling hundreds of thousands of dollars (or more).

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Cost of General Liability Insurance

On average, tool rental businesses in America spend between $500 - $1,500 per year for $1 million in general liability coverage.

Compare the average cost of general liability insurance for a tool rental business to other professional industries using the graph below.

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • Number of employees
  • Per-occurrence limit
  • General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner’s policy (BOP) rather than as a standalone policy.

A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

Graph showing average price of general liability insurance prices per industry

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Common Situations That General Liability Insurance May Cover for a Tool Rental Business

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Example 1: A customer is in your tool rental shop with his children. The little boy is playing with a sledgehammer when he drops it and breaks his sister’s foot. The customer decides to sue your business. Your general liability insurance will pay for your legal defense, including the cost of a settlement if necessary.

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Example 2: One of your new employees attempts to load a mini skid loader into a trailer for a customer. He loses control and runs into the side of the customer’s truck. The general liability insurance you carry will pay for damage to customer property caused by you or your employees.

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Example 3: A customer is rushing to the restroom when he slips and falls on the recently mopped floor. He breaks his wrist and asks that you pay for the medical treatment. Your general liability insurance will likely cover this expense.

Other Types of Coverage Tool Rental Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some of the most common types of coverage:

Product Liability Insurance

The products you offer your customers are relatively safe as long as they are used as directed. However, there is always a possibility that a customer will get hurt or claim to have been injured from one of your products. Product liability insurance will pay for your legal defense in such a situation.

Commercial Property Insurance

You have invested a lot in the tools and equipment that you offer for rent. If you were to lose that property in an unexpected event, like a fire, you might have trouble financially replacing everything. With a commercial property insurance policy, you can get help with replacement costs as long as the damage was caused by a covered event.

Workers’ Compensation Insurance

If you have employees, there is a good chance that your state requires you to carry workers’ comp insurance. A workers’ comp policy provides coverage for medical expenses if an employee is injured performing job-related duties. They can also get help with lost wages if they cannot work while they recover.

Commercial Umbrella Insurance

The general liability insurance policy you carry is sufficient for most circumstances, but there is a possibility that its limits could be exceeded—like if you were to lose a major lawsuit. If your general liability insurance limits are exceeded, an umbrella policy would kick in where the general liability policy left off.

Additional Steps To Protect Your Business

Although it’s easy (and essential) to invest in business insurance, it shouldn’t be your only defense.

Here are several things you can do to better protect your tool rental business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up an LLC or corporation to protect your personal assets. (Visit our step-by-step guides to learn how to form an LLC or corporation in your state.)
  • Stay up to date with business licensing.
  • Maintain your corporate veil.

Tool Rental Business Insurance FAQ

Yes, absolutely. You will need to first get a quote from an online business insurance provider like Next Insurance. Next allows you to then purchase a policy immediately and your coverage will be active within 48 hours.

A typical business owner’s policy includes general liability, business interruption, and commercial property insurance. However, BOPs are often customizable, so your agent may recommend adding professional liability, commercial auto, or other types of coverage to your package depending on your company’s needs.

"Business insurance" is a generic term used to describe many different types of coverage a business may need. General liability insurance, on the other hand, is a specific type of coverage that business owners need to protect their assets.

You should invest in business insurance coverage for your business before your first interaction with a customer. Although the cost of insurance may seem high for a brand new business, it’s best to be proactive when it comes to protecting your assets. After all, you can’t buy insurance to cover a loss that has already occurred.

Not necessarily. Certain exceptions may be written directly into your tool rental business insurance policy, and some perils may be entirely uninsurable.

Yes, an LLC is meant to create a legal barrier between your business and your personal assets and credit. If you haven’t formed an LLC yet, use our Form an LLC guide to get started.

An LLC doesn’t protect your business assets from lawsuits and liability– that’s where business insurance comes in. Business insurance helps protect your business from liability and risk.