The purpose of the flight was for the certified flight instructor (CFI) to demonstrate the helicopter to a prospective student who had no prior helicopter flying experience. They had just performed an hour of uneventful flight, and decided to practice hover maneuvers over a turf area adjacent to the airport helipad. The CFI briefed the student on the sensitivity of the helicopter controls during a hover, and then passed over control. The student unsuccessfully attempted to perform a hover, and the CFI then regained control. He elected to let the student try to hover again, and as he relinquished control, the helicopter rolled to the left. The CFI attempted to correct the deviation; however, during recovery the low rotor rpm warning horn sounded. He increased the throttle, but the skid made contact with the ground and the helicopter rolled onto its side. The helicopter sustained substantial damage to the rotor system and gearbox during the accident sequence.