What pitfalls to avoid or suggestions do you have for starting up a
camera equipment rental business?  The big question is I'm wondering
what kind of insurance I need to cover renting out equipment to
protect myself from theft damage to my equipment and if there are any
legal issues.  To me it seems like:

1.) Get a lot of equipment
2.) Rent it out
3.) Maybe provide support

If something is stolen or broken insurance and or the renter covers
it, I don't really know or anticipate it being more complicated which
doesn't seem right...

Thanks

How do you test every camera equipment returned to make sure it is
still in PERFECT working condition?  Most defects may not be
noticeable even on meticulous inspection.  Once the customer signs off
and is given a 'OK' bill, he/she cannot be contacted later regarding
any found defects.

I could be wrong, and expect a more experienced researcher (perhaps in
photography) to state otherwise.  Best of luck in your proposed
venture!

My husband has run his own business for more than 20 years. My best
advice is that if you want to start a business, you are most likely to
succeed if you begin by doing something with which you have some
familiarity and knowledge. If you have absolutely no experience in
equipment rental, your chance of success may be slim; there are
undoubtedly many twists and turns of which you are unaware. Stick with
what you know.

I agree with Pinkfreud.
Have you made any estimate of what rental payment you can get for a
camera; how much rental income you need to survive; the number of
cameras, lenses, whatever you need to have out on rent to achieve
this; the investment in equipment necessary to provide the equipment 
- also considering that you need to offer a variety of equipment, not
all of which will be rented?
I seriously doubt that the numbers work out.
 
AND then:  what is the market for renting camera equipment, AND would
you want to rent to someone who cannot or will not afford to buy his
own camera?